English, Article, Journal or magazine article
COINTEGRATION AND ASYMMETRIC ADJUSTMENT: SOME NEW EVIDENCE CONCERNING THE BEHAVIOUR OF THE US CURRENT ACCOUNT
Mark J. Holmes; Theodore Panagiotidis
Cointegration and asymmetric adjustment: Some new evidence concerning the behaviour of the US current account
Mark J. Holmes
This study conducts an investigation into the extent of cointegration between imports and exports and asymmetries in the adjustment of the US current account over the study period 1960Q4-2007Q2. We find evidence in favour of cointegration through the application of the standard Johansen methodology. Employing the Trace test procedure recursively, two distinct regimes are identified according to whether or not imports and exports are cointegrated. We also consider the Breitung (2002) and Breitung and Taylor (2003) nonparametric cointegration test procedures that do not assume linear short-run dynamics. Further analysis of the asymmetric short-run dynamics reveals that adjustment towards long-run equilibrium is primarily driven by US exports responding to current account deficits.
US Current Account, Sustainability, Cointegration, structural changes, nonparametric cointegration, recursive Trace test statistic, recursive betas, asymmetric error correction..
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