Are Current Account Deficits in the OECD Countries Sustainable? Robust Evidence from Time-Series Estimators. Issue 1 (1st January 2017)

• Record Type: Journal Article
• Authors: Singh, Tarlok
• Is Part Of: International trade journal. Volume 31:Issue 1(2017)
• Page Start: 29
• Page End: 64
• Publication Date: 2017-01-01
• Subjects: Cointegration -- current account deficits -- exports -- imports -- structural breaks; International trade -- Periodicals; Commerce -- Periodicals; International economic relations -- Periodicals; 382
• DOI: 10.1080/08853908.2016.1217177
• Languages: English
• ISSNs: 0885-3908

Abstract

ABSTRACT: This study examines the sustainability of current account deficits (CADs) and validity of intertemporal budget constraint (IBC) for 24 OECD countries. While the OLSEG, ML system, and OLSGH estimates of the model do not provide support, the GMM, DOLS, and NLLS estimates provide consistent support for the sustainability of CADs across most countries. The estimates of the model with multiple structural breaks reinforce the sustainability of CADs. The results provide dominant support for the sustainability of CADs and validity of IBC across most countries. The CADs are only short-run phenomena and are balanced by future surpluses.