Mean Reversion of the Current Account and Sustainability: Evidence from European Countries

Mean Reversion of the Current Account and Sustainability: Evidence from European Countries

Title:

Mean Reversion of the Current Account and Sustainability: Evidence from European Countries

Number:

14/11

Author(s):

Kurmaş Akdoğan

Language:

English

Date:

April 2014

Abstract:

Stationarity of the current account is suggested as an indicator of the current account sustainability in the literature. We explore the presence of mean-reverting behaviour in current accounts of 24 European countries, using linear and nonlinear unit root tests. Our results suggest mean reversion of the current account-to-GDP ratios for almost two-thirds of the countries in our sample, hence; provide supporting evidence for the current account sustainability of these countries.

Keywords:

Current account sustainability, Stationarity, Nonlinear adjustment, Nonlinear models

JEL Codes:

C22; F32

Mean Reversion of the Current Account and Sustainability: Evidence from European Countries
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