Are US current account deficits unsustainable?: Testing for the private and government intertemporal budget constraints |
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Institution: | 1. Department of Economics, Waikato University, New Zealand;2. Facultad de Economía, Universidad del Rosario, Colombia;1. Department of Plastic Surgery, University of Texas Southwestern Medical Center, Dallas, TX, United States;2. Department of Plastic Surgery, Asan Medical Center, University of Ulsan, College of Medicine, 88 Olympic‐ro 43gil, Seoul 05505, South Korea |
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Abstract: | This paper re-examines whether the huge external deficits in the United States for the last few decades are sustainable by using time series methods. Two distinct analytical differences from earlier works are considered. First, the private sector and government are separated to construct the current account identities used in this paper. Second, both the necessary and sufficient conditions for the sustainability of external deficits are explicitly considered. Taking these modifications into consideration, the empirical results of this study do not necessarily reject the hypothesis that external deficits in the US are sustainable. |
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