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Long-run relationship between exports and imports: current account sustainability tests for the EU

Abstract : 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.
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https://hal.archives-ouvertes.fr/hal-02499351
Contributor : Isabelle Celet <>
Submitted on : Thursday, March 5, 2020 - 10:59:08 AM
Last modification on : Thursday, March 5, 2020 - 7:03:02 PM

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Antonio Afonso, Florence Huart, João Tovar Jalles, Piotr Stanek. Long-run relationship between exports and imports: current account sustainability tests for the EU. Portuguese Economic Journal, Springer Verlag, 2019, ⟨10.1007/s10258-019-00168-x⟩. ⟨hal-02499351⟩

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