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Sustainability Analysis of Current Account In the European Union Countries: FADF and FKSS Unit Root Tests

Year 2021, Volume: 7 Issue: 2, 199 - 212, 20.10.2021
https://doi.org/10.20979/ueyd.915113

Abstract

This paper examines the sustainability of the current account in 27 European Union countries over the period 2005Q1-2020Q3. First, series which is considered as the ratio of the current account to gross domestic product, was applied to the traditional unit root test ADF and the nonlinear unit root test KSS. According to the ADF test, the current account was stationary in 9 countries and according to the KSS test, current account was stationary in 5 countries. Later, nonlinear FADF and FKSS unit root tests based on Fourier were applied. According to the unit root tests results, series were found stationary in 10 countries for FADF and 3 countries for FKSS. ADF and KSS test results are valid for countries whose trigonometric terms are insignificant. According to these results, it can be said that Fourier terms should be taken into account in unit root tests on the current account.

References

  • Babaoğlu, B. (2005). Türkiye’de cari işlemler dengesi sürdürülebilirliği. (Uzmanlık Yeterlilik Tezi). T.C. Merkez Bankası, Ankara.
  • Becker, R., Enders, W., & Lee, J. (2006). A stationarity test in the presence of an unknown number of smooth breaks. Journal of Time Series Analysis, 27(3), 381-409.
  • Bozoklu, Ş., & Yılancı, V. (2014). Current Account Sustainability in Emerging Markets: An Analysis with Linear and Nonlinear Panel Unit Root Tests. Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, 28(4), 251-264.
  • Ceylan, R., & Çeviş, İ. (2012). Enflasyon hedeflemesi̇ reji̇mi̇ öncesi̇ ve sonrasında Türki̇ye’de cari̇ açıkların sürdürülebi̇li̇rli̇ği̇. e-Journal of New World Sciences Academy, 7(4), 259-276.
  • Ceylan, R., Uz, İ., & Çeviş, İ. (2018). Kırılgan beşlide cari açıkların sürdürülebilirliği: Doğrusal olmayan birim kök testleri ile kanıtlar. Ege Akademik Bakış, 18(1), 121-134.
  • Chen, S.-W. (2010). Testing for the sustainability of the current account deficit in four industrial countries: a revisitation. Economics Bulletin, 30(2), 1474-1495.
  • Chen, S.-W. (2011). Current account deficits and sustainability: Evidence from the OECD countries. Economic modelling, 28(4), 1455-1464.
  • Chen, S.-W., & Xie, Z. (2015). Testing for current account sustainability under assumptions of smooth break and nonlinearity. International Review of Economics Finance, 38, 142-156.
  • Chortareas, G. E., Kapetanios, G., & Uctum, M. (2004). An Investigation of Current Account Solvency in Latin America Using Non Linear Nonstationarity Tests. Studies in Nonlinear Dynamics & Econometrics, 8(1), 1-17. doi:doi:10.2202/1558-3708.1200
  • Christopoulos, D., León-Ledesma,M.A. (2010). Current account sustainability in the US: What did we really know about it? Journal of International Money Finance, 29(3), 442-459.
  • Chu, H.-P., Chang, T., Chang, H.-L., Su, C.-W., & Yuan, Y. (2007). Mean reversion in the current account of forty-eight african countries: Evidence from the Panel SURADF test. Physica A: Statistical Mechanics its Applications, 384(2), 485-492.
  • Cuestas, J. C. (2013). The current account sustainability of European transition economies. Journal of Common Market Studies, 51(2), 232-245.
  • Cunado, J., Gil-Alana, L. A., & De Gracia, F. P. (2010). European current account sustainability: New evidence based on unit roots and fractional integration. Eastern Economic Journal, 36(2), 177-187.
  • Demir, M. A. (2019). Yapısal Kırılmalı Birim Kök Testleri Çerçevesinde Türkiye İçin Cari Açık Sürdürülebilirliliği. Third Sector Social Economic Review, 54(1), 261-273.
  • Demircioğlu Karabıyık , E. (2020). Latin Amerika Ülkelerinde Cari İşlemler Dengesi Sürdürülebilirliğinin Amprik Analizi. Avrasya Sosyal ve Ekonomi Araştırmaları Dergisi, 7(10), 115-132.
  • Donoso, V., & Martin, V. J. T. J. o. I. T. (2014). Current account sustainability in Latin America. The Journal of International Trade and Economic Development, 23(5), 735-753.
  • Dulger, F., & Ozdemir, Z. A. (2005). Current Account Sustainability in Seven Developed Countries. Journal of Economic & Social Research, 7(2).
  • Gürdal, T., Kırca, M., İnal, V., & Değirmenci, T. (2018, 2th-14thSeptember 2018). Cari Açığın Sürdürülebilirliği: Fourier Birim Kök Testi. Paper presented at the Business and Organization Research (International Conference), Karabük.
  • Holmes, M. J., Otero, J., & Panagiotidis, T. (2010). On the stationarity of current account deficits in the European Union. Review of International Economics, 18(4), 730-740.
  • Husted, S. (1992). The emerging US current account deficit in the 1980s: a cointegration analysis. The review of Economics Statistics, 159-166.
  • Kalyoncu, H. (2006). International intertemporal solvency in OECD countries: evidence from panel unit root. Prague Economic Paper, 1.
  • Krugman, P., Obstfeld, M., & Melitz, M. (2017). Uluslararası İktisat: Teori ve politika (O. Özsoy, Çev.). Kuo, C.-Y. (2016). Sustainability of Current Accounts: evidence from the quantile unit-root test. Applied Economics Letters, 23(10), 747-755.
  • Lanzafame, M. (2014). Current account sustainability in advanced economies. The Journal of International Trade Economic Development, 23(7), 1000-1017.
  • Lau, E., Baharumshah, A. Z., & Haw, C. T. (2006). Current account: mean-reverting or random walk behavior? Japan and the World Economy, 18(1), 90-107.
  • Mann, C. L. (2002). Perspectives on the US current account deficit and sustainability. Journal of Economic Perspectives, 16(3), 131-152.
  • Milesi-Ferretti, G. M., & Razin, A. (1996a). Current-account sustainability: Princeton University.
  • Milesi-Ferrett, G. M., & Razin, A. (1996b). Sustainability of persistent current account deficits (5467). National Bureau of Economic Research.
  • Obstfeld, M., & Rogoff, K. (1995). The intertemporal approach to the current account. Handbook of international economics, 3, 1731-1799.
  • Saraç, H., & Sivri, U. (2019). Türkiye Ekonomisi Cari Açığı Sürdürülebilir Mi? Birim Kök Testleriyle Bir İnceleme. Uluslararası Ekonomi ve Yenilik Dergisi, 5(2), 137-152.
  • Taştan, S., & Arıç, K. H. (2015). Is Current Account of Turkey Sustainable? Evidence from Nonlinear Unit Root Tests. Romanian Economic Journal, 18(57), 95-114.
  • Trehan, B., & Walsh, C. E. (1991). Testing intertemporal budget constraints: Theory and applications to US federal budget and current account deficits. Journal of Money, Credit Banking, 23(2), 206-223.
  • Türkmen, N. C. (2020). Türkiye’de Cari İşlemler Açığının Sürdürülebilirliği. Jounal of Business and Trade, 1(1), 1-15.
  • Wu, J.-L. (2000). Mean reversion of the current account: evidence from the panel data unit-root test. Economics Letters, 66(2), 215-222.

Avrupa Birliği Ülkelerinde Cari İşlemler Hesabinin Sürdürülebilirlik Analizi: FADF ve FKSS Birim Kök Testleri

Year 2021, Volume: 7 Issue: 2, 199 - 212, 20.10.2021
https://doi.org/10.20979/ueyd.915113

Abstract

Bu çalışmada 27 Avrupa Birliği Ülkesinin 2005Q1-2020Q3 periyodu için cari işlemler hesabının sürdürülebilirliğinin incelenmesi amaçlanmıştır. Cari işlemler hesabının gayri safi yurtiçi hasılaya oranı olarak ele alınan seriye ilk olarak geleneksel birim kök testlerinden ADF ve doğrusal olmayan birim kök testlerinden KSS testi uygulanmıştır. ADF testine göre 9, KSS testine göre ise 5 ülkede cari işlemler hesabının durağan olduğu gözlemlenmiştir. Daha sonra fourier temelli doğrusal olmayan FADF ve FKSS birim kök testlerine yer verilmiştir. Test sonuçlarına göre FADF için 10, FKSS için 3 ülkede durağanlığa rastlanmıştır. Trigonometrik terimleri anlamsız bulunan ülkeler için ADF ve KSS testi sonuçları geçerlidir. Bu sonuçlara göre, cari işlemler hesabı üzerine yapılan birim kök sınamalarında fourier terimlerinin dikkate alınması gerektiği söylenebilir.

References

  • Babaoğlu, B. (2005). Türkiye’de cari işlemler dengesi sürdürülebilirliği. (Uzmanlık Yeterlilik Tezi). T.C. Merkez Bankası, Ankara.
  • Becker, R., Enders, W., & Lee, J. (2006). A stationarity test in the presence of an unknown number of smooth breaks. Journal of Time Series Analysis, 27(3), 381-409.
  • Bozoklu, Ş., & Yılancı, V. (2014). Current Account Sustainability in Emerging Markets: An Analysis with Linear and Nonlinear Panel Unit Root Tests. Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, 28(4), 251-264.
  • Ceylan, R., & Çeviş, İ. (2012). Enflasyon hedeflemesi̇ reji̇mi̇ öncesi̇ ve sonrasında Türki̇ye’de cari̇ açıkların sürdürülebi̇li̇rli̇ği̇. e-Journal of New World Sciences Academy, 7(4), 259-276.
  • Ceylan, R., Uz, İ., & Çeviş, İ. (2018). Kırılgan beşlide cari açıkların sürdürülebilirliği: Doğrusal olmayan birim kök testleri ile kanıtlar. Ege Akademik Bakış, 18(1), 121-134.
  • Chen, S.-W. (2010). Testing for the sustainability of the current account deficit in four industrial countries: a revisitation. Economics Bulletin, 30(2), 1474-1495.
  • Chen, S.-W. (2011). Current account deficits and sustainability: Evidence from the OECD countries. Economic modelling, 28(4), 1455-1464.
  • Chen, S.-W., & Xie, Z. (2015). Testing for current account sustainability under assumptions of smooth break and nonlinearity. International Review of Economics Finance, 38, 142-156.
  • Chortareas, G. E., Kapetanios, G., & Uctum, M. (2004). An Investigation of Current Account Solvency in Latin America Using Non Linear Nonstationarity Tests. Studies in Nonlinear Dynamics & Econometrics, 8(1), 1-17. doi:doi:10.2202/1558-3708.1200
  • Christopoulos, D., León-Ledesma,M.A. (2010). Current account sustainability in the US: What did we really know about it? Journal of International Money Finance, 29(3), 442-459.
  • Chu, H.-P., Chang, T., Chang, H.-L., Su, C.-W., & Yuan, Y. (2007). Mean reversion in the current account of forty-eight african countries: Evidence from the Panel SURADF test. Physica A: Statistical Mechanics its Applications, 384(2), 485-492.
  • Cuestas, J. C. (2013). The current account sustainability of European transition economies. Journal of Common Market Studies, 51(2), 232-245.
  • Cunado, J., Gil-Alana, L. A., & De Gracia, F. P. (2010). European current account sustainability: New evidence based on unit roots and fractional integration. Eastern Economic Journal, 36(2), 177-187.
  • Demir, M. A. (2019). Yapısal Kırılmalı Birim Kök Testleri Çerçevesinde Türkiye İçin Cari Açık Sürdürülebilirliliği. Third Sector Social Economic Review, 54(1), 261-273.
  • Demircioğlu Karabıyık , E. (2020). Latin Amerika Ülkelerinde Cari İşlemler Dengesi Sürdürülebilirliğinin Amprik Analizi. Avrasya Sosyal ve Ekonomi Araştırmaları Dergisi, 7(10), 115-132.
  • Donoso, V., & Martin, V. J. T. J. o. I. T. (2014). Current account sustainability in Latin America. The Journal of International Trade and Economic Development, 23(5), 735-753.
  • Dulger, F., & Ozdemir, Z. A. (2005). Current Account Sustainability in Seven Developed Countries. Journal of Economic & Social Research, 7(2).
  • Gürdal, T., Kırca, M., İnal, V., & Değirmenci, T. (2018, 2th-14thSeptember 2018). Cari Açığın Sürdürülebilirliği: Fourier Birim Kök Testi. Paper presented at the Business and Organization Research (International Conference), Karabük.
  • Holmes, M. J., Otero, J., & Panagiotidis, T. (2010). On the stationarity of current account deficits in the European Union. Review of International Economics, 18(4), 730-740.
  • Husted, S. (1992). The emerging US current account deficit in the 1980s: a cointegration analysis. The review of Economics Statistics, 159-166.
  • Kalyoncu, H. (2006). International intertemporal solvency in OECD countries: evidence from panel unit root. Prague Economic Paper, 1.
  • Krugman, P., Obstfeld, M., & Melitz, M. (2017). Uluslararası İktisat: Teori ve politika (O. Özsoy, Çev.). Kuo, C.-Y. (2016). Sustainability of Current Accounts: evidence from the quantile unit-root test. Applied Economics Letters, 23(10), 747-755.
  • Lanzafame, M. (2014). Current account sustainability in advanced economies. The Journal of International Trade Economic Development, 23(7), 1000-1017.
  • Lau, E., Baharumshah, A. Z., & Haw, C. T. (2006). Current account: mean-reverting or random walk behavior? Japan and the World Economy, 18(1), 90-107.
  • Mann, C. L. (2002). Perspectives on the US current account deficit and sustainability. Journal of Economic Perspectives, 16(3), 131-152.
  • Milesi-Ferretti, G. M., & Razin, A. (1996a). Current-account sustainability: Princeton University.
  • Milesi-Ferrett, G. M., & Razin, A. (1996b). Sustainability of persistent current account deficits (5467). National Bureau of Economic Research.
  • Obstfeld, M., & Rogoff, K. (1995). The intertemporal approach to the current account. Handbook of international economics, 3, 1731-1799.
  • Saraç, H., & Sivri, U. (2019). Türkiye Ekonomisi Cari Açığı Sürdürülebilir Mi? Birim Kök Testleriyle Bir İnceleme. Uluslararası Ekonomi ve Yenilik Dergisi, 5(2), 137-152.
  • Taştan, S., & Arıç, K. H. (2015). Is Current Account of Turkey Sustainable? Evidence from Nonlinear Unit Root Tests. Romanian Economic Journal, 18(57), 95-114.
  • Trehan, B., & Walsh, C. E. (1991). Testing intertemporal budget constraints: Theory and applications to US federal budget and current account deficits. Journal of Money, Credit Banking, 23(2), 206-223.
  • Türkmen, N. C. (2020). Türkiye’de Cari İşlemler Açığının Sürdürülebilirliği. Jounal of Business and Trade, 1(1), 1-15.
  • Wu, J.-L. (2000). Mean reversion of the current account: evidence from the panel data unit-root test. Economics Letters, 66(2), 215-222.
There are 33 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Research Articles
Authors

Yılmaz Toktaş 0000-0002-6996-7987

Ali Altıner 0000-0001-7362-8198

Eda Bozkurt 0000-0001-7158-8049

Publication Date October 20, 2021
Submission Date April 13, 2021
Published in Issue Year 2021 Volume: 7 Issue: 2

Cite

APA Toktaş, Y., Altıner, A., & Bozkurt, E. (2021). Sustainability Analysis of Current Account In the European Union Countries: FADF and FKSS Unit Root Tests. Uluslararası Ekonomi Ve Yenilik Dergisi, 7(2), 199-212. https://doi.org/10.20979/ueyd.915113

International Journal of Economics and Innovation

Karadeniz Technical University, Department of Economics, 61080, Trabzon/Türkiye
28816