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Advisor(s)
Abstract(s)
We assess the sustainability of the current account (CA) balance, net international
investment position (NIIP) and net external debt (NED) in a sample of EU countries using
two complementary approaches. First, we employ both time-series and panel-data
stationarity tests of current account balance-to-GDP ratios as well as cointegration tests
of exports and imports of goods and services. Second, we assess the level of trade balance
that stabilizes the NIIP and the NED. We find that there is sustainability of the CA balance
mainly in a few surplus countries whereas there is more concern about the sustainability
of the NIIP or NED in countries with a credit position than in countries with a debit
position. Both approaches are consistent with each other given the relationship between
flows and stocks, the existence of important structural breaks, and valuation effects via
the exchange rate.
Description
Keywords
Current Account Exports Imports Net Foreign Assets Unit Roots Structural Breaks Cointegration Error-Correction Cross-Sectional Dependence
Pedagogical Context
Citation
,Afonso, António ... [et al.] .2017. "Assessing the sustainability of external imbalances in the European Union". Instituto Superior de Economia e Gestão. DE Working papers nº 10-2017/DE/UECE
Publisher
ISEG - Departamento de Economia