Are US current account deficits unsustainable?Testing for the private and government intertemporal budget constraints

Sustainability of current account deficits in India: an intertemporal perspective

“…The country would be beset with debt overhang and be 'bubble financing' its debt repayments using the Ponzi schemes, if the present value of foreign debt outstanding at the end of time t exceeds the sum of the discounted values of all future net trade surpluses. The empirical evidence across countries remains mixed in that some studies support the sustainability of CADs and validity of IBC (Trehan and Walsh, 1991;Husted, 1992;Bergin and Sheffrin, 2000;Arize, 2002;Matsubayashi, 2005), (ii) some suggest the unsustainability of CADs and violation of IBC (Otto, 1992;Wickens and Uctum, 1993;Wu et al, 1996) and (iii) yet some others yield mixed results (Sawada, 1994;Raybaudi et al, 2004;Holmes, 2006;Konya, 2009;Holmes et al, 2011).…”

Current account sustainability in the US: What did we really know about it?

“…Testing for the presence of unit roots and cointegration in the current account dynamics of developed and emerging markets has been the focus of many papers such as Trehan and Walsh (1991), Otto (1992), Wickens and Uctum (1993), Liu and Tanner (1996), Wu (2000), Taylor (2002) and Matsubayashi (2005). Their results yield mixed conclusions depending on the countries, the sample, and the testing procedures considered.…”

Testing for current account sustainability under assumptions of smooth break and nonlinearity

“…The sample period in this paper covers almost forty years and it is a rough assumption that the sufficient condition is satisfied. This issue has already been carefully examined in Ahmed and Rogers (1995) and Matsubayashi (2005). It should also be noted that care is needed when deciding upon the probability of NPGC.…”