Empirical Economics

, Volume 49, Issue 2, pp 389–402 | Cite as

An analysis of the trade balance for OECD countries using periodic integration and cointegration

  • Tomas del Barrio Castro
  • Mariam Camarero
  • Cecilio Tamarit


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.


Current account Time series Periodic integration  Periodic cointegration 

JEL Classification

F14 F32 C22 



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.


  1. Alterman WF, Diewert WE, Feenstra RC (1999) International trade price indexes and seasonal commodities. Bureau of Labor Statistics, WashingtonGoogle Scholar
  2. Arize AC (2002) Imports and exports in 50 countries. Tests of cointegration and structural breaks. Int Rev Econ Financ 11:101–115CrossRefGoogle Scholar
  3. Balk BM (1980) A method for constructing price indices for seasonal commodities. J R Stat Soc A Stat 143:68–75CrossRefGoogle Scholar
  4. Boswijk HP, Franses PH (1995) Periodic cointegration: representation and inference. Rev Econ Stat 77: 436–454CrossRefGoogle Scholar
  5. Boswijk HP, Franses PH (1996) Unit roots in periodic autoregressions. J Time Ser Anal 17:221–245CrossRefGoogle Scholar
  6. Breitung J (2002) Nonparametric tests for unit roots and cointegration. J Econom 108:343–363CrossRefGoogle Scholar
  7. del Barrio Castro T, Pons E, Suriach J (2002) The effects of working with seasonal adjusted data when testing for unit roots. Econ Lett 75:249–256CrossRefGoogle Scholar
  8. del Barrio Castro T, Osborn DR (2008) Cointegration for periodically integrated processes. Econom Theory 24(1):109–142Google Scholar
  9. del Barrio Castro T, Osborn DR (2011) Nonparametric tests for periodic integration. J Time Ser Econom 3(1), Article 4Google Scholar
  10. del Barrio Castro T, Osborn DR (2012) Non-parametric testing for seasonally and periodically integrated processes. J Time Ser Anal 33:424–437CrossRefGoogle Scholar
  11. Diewert WE (1998) High inflation, seasonal commodities and annual index numbers. Macroecon Dyn 2:456–471CrossRefGoogle Scholar
  12. Franses PH (1994) A multivariate approach to modeling univariate seasonal time series. J Econom 63: 133–151CrossRefGoogle Scholar
  13. Franses PH, Paap R (1994) Model selection in periodic autoregression. Oxf B Econ Stat 56:421–440CrossRefGoogle Scholar
  14. Franses PH, Paap R (2004) Periodic time series models. Oxford University Press, OxfordCrossRefGoogle Scholar
  15. Gersovitz M, McKinnon JG (1978) Seasonality in regression: an application of smoothness priors. J Am Stat Assoc 73:264–273CrossRefGoogle Scholar
  16. Ghysels E (1990) Unit-root tests and the statistical pitfalls of seasonal adjustment: the case of U.S. postwar real gross national product. J Bus Econ Stat 8(2):145–152Google Scholar
  17. Ghysels E, Perron P (1993) The effect of seasonal adjustment filters on tests for unit roots. J Econom 55:57–99CrossRefGoogle Scholar
  18. Ghysels E, Osborn DR (2001) The econometric analysis of seasonal time series. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  19. Gourinchas PO, Rey H (2007) International financial adjustment. J Polit Econ 115(4):665–703CrossRefGoogle Scholar
  20. Gupta JB (1965) Seasonality in world financial and trade data. IMF Staff Pap 12:353–364CrossRefGoogle Scholar
  21. Hamori S (2009) The sustainability of trade accounts of the G-7 countries. Appl Econ Lett 16:1691–1694CrossRefGoogle Scholar
  22. Hansen LP, Sargent TJ (1993) Seasonality and approximation errors in rational expectation models. J Econom 55:21–55Google Scholar
  23. Husted S (1992) The emerging U.S. current account deficit in the 1980s: a cointegration analysis. Rev Econ Stat 74(1):159–166CrossRefGoogle Scholar
  24. Hylleberg S (1995) Tests for seasonal unit roots: general to specific or specific to general? J Econom 69(1):5–25CrossRefGoogle Scholar
  25. Hylleberg S, Engle R, Granger CWJ, Yoo BS (1990) Seasonal integration and co-integration. J Econom 44(1–2):215–238CrossRefGoogle Scholar
  26. IMF (2004) Treatment of seasonal products. In: Producer price index manual, Chapter 22. IMF, WashingtonGoogle Scholar
  27. Johansen S (1988) Statistical analysis of cointegration vectors. J Econ Dyn Control 12:231–254CrossRefGoogle Scholar
  28. Johansen S, Schaumburg E (1998) Likelihood analysis of seasonal cointegration. J Econom 88(2):301–339CrossRefGoogle Scholar
  29. Kunst R (2009) A nonparametric test for seasonal unit roots, Economic Series 233. Institute for Advanced StudiesGoogle Scholar
  30. Kunst R (1997) Testing for cyclical non-stationarity in autoregressive processes. J Time Ser Anal 18: 123–135CrossRefGoogle Scholar
  31. Lee HS (1992) Maximum likelihood inference on cointegration and seasonal cointegration. J Econom 54(1–3):1–47CrossRefGoogle Scholar
  32. Maravall A (1993) Stochastic linear trends. J Econom 56:5–37Google Scholar
  33. Mitchell WC (1927) Business cycles. National Bureau of Economic Research, New YorkGoogle Scholar
  34. Newey WK, West KD (1994) Automatic lag selection in covariance matrix estimation. Rev Econ Stud 61:631–653CrossRefGoogle Scholar
  35. Osborn DR (1988) Seasonality and habit persistence in a life-cycle model of consumption. J Appl Econom 3:255–266CrossRefGoogle Scholar
  36. Osborn DR (1991) The implications of periodically varying coefficients for seasonal time series. J Econom 28:323–384Google Scholar
  37. Osborn DR, Chui PL, Smith JP, Birchenhall CR (1988) Seasonality and the order of integration for consumption. Oxf B Econ Stat 50:361–377CrossRefGoogle Scholar
  38. Paap R, Franses PH (1999) On trends and constants in periodic integration. Econom Rev 18:271–286CrossRefGoogle Scholar
  39. Perron P, Ng S (1996) Useful modifications to some unit root tests with dependent errors and their local asymptotic properties. Rev Econ Stud 63:435–463Google Scholar
  40. Phillips PCB, Ouliaris S (1988) Testing for cointegration using principal components methods. J Econ Dyn Control 12(2–3):205–230Google Scholar
  41. Rodrigues PMM, Taylor AMR (2007) Efficient tests of the seasonal unit root hypothesis. J Econom 141: 548–573CrossRefGoogle Scholar
  42. Sargan JD, Bhargava A (1983) Testing for residuals from least squares regression being generated by Gaussian random walk. Econometrica 51:153–157CrossRefGoogle Scholar
  43. Stock JH (1999) A class of tests for integration and cointegration. In: Engle RF, White H (eds) Cointegration, causality and forecasting. A Festchrift in Honour of Clive W.F. Granger. Oxford University Press, OxfordGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  • Tomas del Barrio Castro
    • 1
  • Mariam Camarero
    • 2
  • Cecilio Tamarit
    • 3
  1. 1.University of The Balearic IslandsPalmaSpain
  2. 2.University Jaume ICastellón de la PlanaSpain
  3. 3.University of ValenciaValenciaSpain

Personalised recommendations