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Christian-Albrechts-Universität zu Kiel

Institut für Volkswirtschaftslehre - Department of Economics
Economics Working Papers

Economics Working Papers: Abstract 2006-07




Helmut Herwartz, Fang Xu




Reviewing the sustainability/stationarity of current account imbalances with tests for bounded integration
Abstract We investigate for 26 OECD economies if their current account imbalances are driven by stochastic trends. Standard ADF results are contrasted with tests accounting for the bounded support of the current account. Neglecting the latter feature might give misleading results in the sense that ADF based conclusions are biased towards the rejection of unit root features. The current account imbalances are found to be bounded nonstationary for most OECD economies. Panel based test statistics confirm the bounded nonstationarity for these series.

Keywords: Current account, bounded unit root tests

JEL classification: C12, C22, C23, F32, E21, E22




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