An analysis of the trade balance for OECD countries using periodic integration and cointegration

We analyze imbalances in external accounts that have historically a¤ected most developed countries. The purpose of this study is to shed some light on the sus- tainability of the current account for a group of OECD countires by merging the popular Husted (1992) testing procedure with recent econometric analysis dealing with seasonality. A necessary condition for current account sustainability is that exports and imports are cointegrated. Following previous empirical studies (Husted (1992), Arize (2002) and Hamori (2009)) we analyze the long-run relationship link- ing exports and imports, using quarterly data. In contrast to these studies, we explicitly deal with seasonal e¤ects through the use of periodic integration and cointegration and …nd a long-run relationship for the majority of the countries.