Prague Economic Papers 2006, 15(1):44-49 | DOI: 10.18267/j.pep.275

International Intertemporal Solvency in OECD Countries: Evidence from Panel Unit Root

Hüseyin Kalyoncu
Department of Economics, Cukurova University 01330, Adana, TURKEY (e-mail: kalyuncu@cu.edu.tr).

The purpose of this study is to investigate the sustainability of current account of 22 OECD countries by employing Liu and Tanner (1996) testing procedure. The procedure used here is to examine stationarity of current account. By using ADF unit root test on single time series, it has been found that current account of most OECD countries have unit root. This outcome, however, might be due to the generally low power of this test. The aim of this paper is to reconsider this issue by exploiting the extra information provided by the combination of the time-series and cross-sectional data and the subsequent power advantages of panel data unit root tests. We apply the test advocated by Im, Pesaran and Shin (1997). According to estimation, current account deficits in OECD countries are sustainable.

Keywords: current account, panel data unit-root test, solvency
JEL classification: C23, F30, F32

Published: January 1, 2006  Show citation

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Kalyoncu, H. (2006). International Intertemporal Solvency in OECD Countries: Evidence from Panel Unit Root. Prague Economic Papers, 15(1), 44-49. doi: 10.18267/j.pep.275
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