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Advisor(s)
Abstract(s)
We assess the sustainability of external imbalances for EU countries using panel stationarity tests of Current Account (CA) balance-to-GDP ratios and panel cointegration of exports and imports of goods and services, for the period 1970Q1–
2015Q4. We find that: i) the country panel is non-stationary; ii) cross-sectional dependence plays an important role; iii) there is non-stationarity of the CA, imports, and exports with cross-sectional panel dependence and multiple structural breaks; iv) however, there is a stable long-run relationship between exports and imports in the panel. Hence, trade imbalances can be less unsustainable but this is not sufficient to make current account imbalances sustainable.
Description
Keywords
Current account Exports Imports Unit roots Cointegration
Pedagogical Context
Citation
Afonso, António ... [et al.] (2020). "Long-run relationship between exports and imports: current account sustainability tests for the EU". Portuguese Economic Journal, 19(2):155-170
Publisher
Springer