Abstract
We analyze imbalances in external accounts that have historically affected most developed countries. The purpose of this study was to shed some light on the sustainability of the current account for a group of OECD countries by merging the popular Husted (Rev Econ Stat 74(1):159–166, 1992) testing procedure with recent econometric analysis dealing with seasonality. A necessary condition for current account sustainability is that exports and imports are cointegrated. Following previous empirical studies (Husted 1992; Arize in Int Rev Econ Financ 11:101–115, 2002; Hamori in Appl Econ Lett 16:1691–1694, 2009), we analyze the long-run relationship linking exports and imports, using quarterly data. In contrast to these studies, we explicitly deal with seasonal effects through the use of periodic integration and cointegration and find a long-run relationship for the majority of the countries.
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Notes
In Gersovitz and McKinnon (1978) it is also possible to find arguments in favor of the use Periodic Autoregressive models.
The presence of a level shift recommends the use of unit root tests that explicitly allow for it in the alternative hypothesis. This will be the object of future research.
We have not applied these procedures to our data because these methods perform well in this context for sample sizes of around 75 years in the case of the Johansen tests and 100 years in the case of the Breitung tests.
The role played by intercepts and trends in periodically integrated processes is more complicated than in the case of standard integrated processes. For an in-depth analysis of this, see Paap and Franses (1999)
Following the suggestion of one referee, we have conducted the cointegration analysis for the annual data using the Johansen procedure and Engle and Granger two steps approach. The results are available upon request from the authors. As expected, it is possible to say the aggregation process do not alter the long-run relationships between the analyzed variables.
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Acknowledgments
We thank Denise R. Osborn for her helpful suggestions on a previous version of this paper, and also the constructive comments of two anonymous referees and the editor of the Journal. The authors gratefully acknowledge financial support from MICINN (Projects ECO2011-23934 and ECO2011-30260-C03-01). The paper has been finished during a stay of C. Tamarit at the University of Goettingen funded by the Spanish Ministry of Education mobility programme (Grant Ref. PRX12/00103). C. Tamarit and M. Camarero are members of INTECO research group funded by Generalitat Valenciana, PROMETEO 2009/098 project as well as the European Commission (Lifelong Learning Program-Jean Monnet Action references 542457-LLP-1-2013-1-ES-AJM-CL and 542434-LLP-1-2013-1-ES-AJM-CL). This publication reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein.
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del Barrio Castro, T., Camarero, M. & Tamarit, C. An analysis of the trade balance for OECD countries using periodic integration and cointegration. Empir Econ 49, 389–402 (2015). https://doi.org/10.1007/s00181-014-0874-y
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DOI: https://doi.org/10.1007/s00181-014-0874-y