Prague Economic Papers 2004, 13(4):347-358 | DOI: 10.18267/j.pep.247

Current Account Deficits in the Transition Economies

Mark J. Holmes
Loughborough University, Loughborough LE11 3TU, United Kingdom (e-mail: M.J.Holmes@Lboro.ac.uk).

This study tests for the stationarity and sustainability of current account deficits for ten transition economies. For this purpose, a new test is employed that allows one to test for unit roots in heterogeneous panel datasets. While the benefits from creating a panel to overcome low test power are well known, this test also offers key advantages over existing alternative panel data unit root tests: it is able to identify which members within the panel are responsible for rejecting the null hypothesis of joint non-stationarity. In addition, the SURADF test does not presume disturbances that are independently and identically distributed. Using data covering 1993 - 2001, this study finds strong evidence in favour of current account mean-reversion for six countries. Of the six countries in the sample that joined the European Union in May 2004, non-stationarity was confirmed in the case of Lithuania only.

Keywords: transition economies, panel data, current account, unit root
JEL classification: F3, F4

Published: January 1, 2004  Show citation

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Holmes, M.J. (2004). Current Account Deficits in the Transition Economies. Prague Economic Papers, 13(4), 347-358. doi: 10.18267/j.pep.247
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