Dealing with an error correction model when trade balances are trend-stationary

The present research shows how one can deal with stationary plus trend trade balance variables in a trade model whenever the rest of the variables contain a unit root. Data are used in a monthly and a quarterly basis from January 1980 to June 2011 and applied to four countries (Germany, France, Italy and United Kingdom). It is proved that an error correction mechanism suits better when detrending trade balances once they have been verified to have a deterministic trend.

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Year of publication:	2014
Authors:	Cantavella-Jordá, Manuel
Published in:	Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 21.2014, 13, p. 882-886
Publisher:	Taylor & Francis Journals

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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