OECD current account unit root cointegration panel data
The study examines the stationarity and long-run sustainability of OECD
current account balances. For this purpose, tests for stationarity and then
cointegration between exports and imports are based on recently developed panel
data methods that offer increased power over existing time series techniques. Unlike
existing panel studies on this topic, this study utilizes techniques that enable the
examination of sustainability for individual panel members. The first stage of the
investigation relies on a novel approach to unit root testing whereby tests for
stationarity are conducted within a seemingly unrelated regression framework. The
second stage involves the estimation of the long-run relationship between the exports
and imports by a range of recently developed panel data techniques advocated by
Pedroni. Using a panel of eleven OECD countries for the study period 1980-2002, the
results from these techniques suggest that sustainability is present in six countries at
most. Also, sustainability is generally a characteristic of the non-Euro countries.
These results can be contrasted with existing group mean unit root and cointegration
tests that indicate sustainability for the group as a whole.