Abstract:
We have tested for a long-run relationship between four US export measures
and analogous import measures (measured in nominal and real terms, levels
and deflated by GNP) in the 1967-1994 period using quarterly data. Using
various econometric tests that include standard Engle-Granger cointegration
tests and two tests that allow for test-determined breaks in the cointegrating
relationship, we have shown that the hypothesis of no long-run relationship
between exports and imports cannot be rejected. This finding contrasts
sharply with earlier literature and carries the important policy implication
that US current account deficits are not sustainable.
