Sustainability of current account balances in small states
DOI:
https://doi.org/10.17811/ebl.9.1.2020.14-20Abstract
This article applies the inter-temporal budget constraint framework and panel cointegration tests to examine the sustainability of current account deficits in 17 small states over the period 1995-2016. The findings show the existence of cointegration between real exports and real imports, but with the magnitude of the long-run coefficient being less than one, which support a “weak” form of current account sustainability in small states.
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