The sustainability of the current account in the Czech Republic,Hungary and Slovenia |
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Authors: | László Kónya |
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Institution: | (1) Department of Economics and Finance, La Trobe University, Bundoora, VIC, 3086, Australia |
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Abstract: | The aim of this paper is to investigate empirically the sustainability of the current account in three Central European countries,
the Czech Republic, Hungary and Slovenia, since their move towards market economy about 15 years ago. The analysis is based
on the intertemporal approach to the current account which states that if real exports and real imports are integrated of
order one then cointegration between them is a necessary and sufficient condition for the economy to satisfy its intertemporal
budget constraint. On the basis of various unit-root and cointegration tests on the shares of real exports and imports in
real GDP, this study concludes that the Czech Republic and Slovenia are not in violation of their intertemporal budget constraint
and their trade imbalances are sustainable. However, the real exports and imports of these countries, and also the export,
import measures of Hungary, do not seem to behave as random walks, excluding the possibility of cointegration between them.
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Keywords: | Current account Intertemporal budget constraint Cointegration Central Europe |
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