Abstract
This study estimates the intertemporal model for the relationship between imports and exports and examines the sustainability of CADs and validity of IBC for a comprehensive set of 24 OECD countries. The balanced panel data model is estimated using several single-equation and system estimators to assess the robustness of results across methodologies and test statistics. The study finds that the numerical magnitude of the slope parameter of imports is close to unity consistently across estimators. The standard panel data estimators provide consistent support for the sustainability of CADs and validity of IBC. The optimal FMOLS and DOLS estimators cross-validate the evidence and reinforce the sustainability of CADs. The residual-based single-equation and the VAR-based system cointegration estimators provide consistent support for the long-run equilibrium relationship between imports and exports. The support for the sustainability of CADs suggests that the current account deficits are only short-run phenomena and are balanced by future surpluses. The macroeconomic stabilisation strategies seem to have been effective in correcting the market failures and maintaining the steady-state equilibrium relationship between the inflow and outflow of resources.
References
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Articles in the same Issue
- Analyzing Trade Growth Effects of Deviations from Long-run Economic Growth
- The Asymmetric Effects of Exchange Rate Changes on the Trade Balance of Singapore
- Economic Freedom and the Informal Economy
- Sustainability of Current Account Deficits in the OECD Countries: Evidence from Panel Data Estimators
- The Anatomy of Trade Deflection
- An Empirical Analysis of Aggregate Import Demand Function for India
- Russia and the Use of Trade Policy: Concentration with Soviet Successor States
- The Comparative Advantages in the Services Sector of Developing Economies
Articles in the same Issue
- Analyzing Trade Growth Effects of Deviations from Long-run Economic Growth
- The Asymmetric Effects of Exchange Rate Changes on the Trade Balance of Singapore
- Economic Freedom and the Informal Economy
- Sustainability of Current Account Deficits in the OECD Countries: Evidence from Panel Data Estimators
- The Anatomy of Trade Deflection
- An Empirical Analysis of Aggregate Import Demand Function for India
- Russia and the Use of Trade Policy: Concentration with Soviet Successor States
- The Comparative Advantages in the Services Sector of Developing Economies