Current account sustainability in advanced economies

Matteo Lanzafame

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the sustainability of current accounts in advanced economies, using a panel of 27 countries and annual data over the 1980-2008 period. We find strong evidence in favour of nonlinear but stationary current-account trajectories for 14 countries, while the remaining 13 appear to be nonstationary and, thus, unsustainable. Our analysis indicates that careful empirical modeling of current-account dynamics, particularly in relation to cross-section dependence and nonlinear behaviour, is crucial for appropriate economic policymaking.

Keywords: Current account sustainability; panel unit root tests; nonlinearity (search for similar items in EconPapers)
JEL-codes: C33 (search for similar items in EconPapers)
Date: 2012-11-01
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:42384

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