Current Account Sustainability: A Non-linear Comparative Empirical Overview

  • Pelin Varol İyidoğan Hacettepe University, Department of Public Finance, Ankara, Turkey
  • Taner Turan Gebze Technical University, Department of Economics, Kocaeli, Turkey

Abstract

This study aims to examine the sustainability of current account deficits for Hungary, Poland, Czech Republic and Turkey over the period 1998Q1:2014:2, with a special attention to the Turkish case, by applying the theoretical model of Steven Husted (1992). The main motive for the choice of time span is that the period comprises the outcomes of two important crises Turkish economy experienced in 2001 and 2008. The empirical testing procedure of the sustainability is two-fold so as to be linear and nonlinear. Both linear and nonlinear test results provide evidence that the current account deficit is unsustainable for Turkey, Poland and Czech Republic. On the other hand, linear and nonlinear test results lead to a conflicting evidence for Hungary. We conclude that there is a need to reduce the current account deficit for the countries examined. Otherwise, a sharp adjustment may be inevitable.


Key words: current account, sustainability, co-integration, nonlinearity. 
JEL: C32, F32.


Održivost tekućeg računa: Nelinearni komparativni empirijski pregled


Rad ima za cilj da ispita održivost deficita tekućeg računa za Mađarsku, Poljsku, Češku Republiku i Tursku tokom perioda 1998Q1: 2014Q2, sa posebnom pažnjom na slučaj Turske, primenom teorijskog modela Stevena Husteda (1992). Glavni motiv za izbor vremenskog perioda je da period obuhvata rezultate dve važne krize turske privrede koje su se desile 2001. i 2008. godine. Postupak empirijskog testiranja održivosti je dvostruko, linearni i nelinearni. Rezultati linearnog i nelinearnog testa pokazuju da je deficit tekućeg računa Turske, Poljske i Češke neodrživ. Sa druge strane, rezultati linearnih i nelinearnih testova dovode do konfliktnih dokaza za Mađarsku. Zaključujemo da postoji potreba da se smanji deficit tekućeg računa za ispitane zemlje. U suprotnom, oštro podešavanje može biti neizbežno.


Ključne reči: Tekući račun, održivost, kointegracija, nelinearnost.


 

How to Cite
İyidoğan P.V., & Turan T. (2018). Current Account Sustainability: A Non-linear Comparative Empirical Overview. Panoeconomicus, 65(4), 395-410. doi:10.2298/PAN141102007I
Section
Original scientific paper