The sustainability of trade balances in Sub-Saharan Africa: panel cointegration tests with cross-section dependence

HASHIGUCHI, Yoshihiro and HAMORI, Shigeyuki (2010): The sustainability of trade balances in Sub-Saharan Africa: panel cointegration tests with cross-section dependence.

Abstract

This paper investigates the sustainability of trade balances in the Sub-Saharan African regions, using both the panel unit root (IPS) test proposed by Im et al. (2003) and the cross-sectionally augmented version of the IPS (CIPS test) suggested by Pesaran (2007), where the former test is based on the assumption of cross-section independence and the latter allows for it. On the one hand, the empirical results based on the IPS test indicate that the balance of trade in Sub-Saharan African regions is sustainable. On the other hand, the empirical results of the CIPS test reveal that it is not. Since cross-section dependence was recognized using the CD test developed by Pesaran (2004), the empirical results based on the IPS test could be spurious.

• Item Type: MPRA Paper
• Language: English
• Keywords: sustainability; trade balances; Sub-Saharan Africa; CIPS test
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics

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