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Mean reversion in the current account of forty-eight african countries: Evidence from the Panel SURADF test |
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| Authors: | Hsiao-Ping Chu Tsangyao Chang |
| Affiliation: | a Department of Business Administration, National Chung Hsing University; Department of Business Administration, Ling Tung University, Taichung, Taiwan b Department of Finance, Feng Chia University, Taichung, Taiwan c Department of Accounting and Information Technology, Ling Tung University, Taichung, Taiwan d Department of Finance, Providence University, Taichung, Taiwan e Department of Accounting and Information Technology, Ling Tung University, Taichung, Taiwan |
| Abstract: | Here, the Panel seemingly unrelated regressions augmented Dickey-Fuller test (SURADF) test, first introduced and advanced by Breuer et al. [Misleading inferences from panel unit-root tests with an illustration from purchasing power parity, Rev. Int. Econ. 9(3) (2001) 482-493], is used to investigate the mean-reverting behavior of the current account of 48 African countries during the 1980-2004 periods. The empirical results from numerous panel-based unit root tests, conducted earlier, indicated that the current account of each of these countries is stationary; however, when Breuer et al.'s (2001) Panel SURADF test is conducted, it is found that a unit root exists in the current account of 11 of the countries studied. These results have one extremely important policy implication for the 48 African countries studied: the current account deficit of most is sustainable, and thus signifying that those nations should have no incentive to default on their international debt. |
| Keywords: | Mean reversion Current account Panel SURADF test |
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