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Are the US current account deficits really sustainable?

Fountas, Stilianos
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1998-03
Keywords
Economics, Current account deficits, Cointegration, Sustainability
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Working Paper
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Fountas, S. (1998). "Are the US current account deficits really sustainable?" (Working Paper No. 20) Department of Economics, National University of Ireland, Galway.
Abstract
We have tested for a long-run relationship between four US export measures and analogous import measures (measured in nominal and real terms, levels and deflated by GNP) in the 1967-1994 period using quarterly data. Using various econometric tests that include standard Engle-Granger cointegration tests and two tests that allow for test-determined breaks in the cointegrating relationship, we have shown that the hypothesis of no long-run relationship between exports and imports cannot be rejected. This finding contrasts sharply with earlier literature and carries the important policy implication that US current account deficits are not sustainable.
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National University of Ireland, Galway
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Attribution-NonCommercial-NoDerivs 3.0 Ireland
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Economics (Working Papers)