Multicointegration Analysis of the Sustainability of Foreign Debt

Posted: 19 Nov 1999

See all articles by Lori L. Leachman

Lori L. Leachman

Duke University - Department of Economics

Bill B. Francis

University of South Florida - College of Business Administration

Abstract

Using the multicointegration framework suggested by Granger and Lee (1989, 1990) and developed in Engsted, Gonzalo and Haldrup (1997) and Haldrup (1997) this study explores the long-run relationship between components of the U.S. current account during two periods, 1947:i-1973:iv and 1974:i-1994:ii. The paper develops the concept of sustainability of external imbalances in an environment that is non-deterministic and characterized by uncertainty. The sustainability criteria are related to multicointegration. Evidence consistent with sustainable intertemporal external budgeting in the fixed exchange rate era is presented. In the post Bretton Woods period there is no support for sustainable external budgeting. Policy issues and factors that affect sustainability are discussed.

JEL Classification: F34

Suggested Citation

Leachman, Lori L. and Francis, Bill B., Multicointegration Analysis of the Sustainability of Foreign Debt. Journal of Macroeconomics, Vol. 22, No. 2, Spring 2000, Available at SSRN: https://ssrn.com/abstract=192192

Lori L. Leachman (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

Bill B. Francis

University of South Florida - College of Business Administration ( email )

4202 E. Fowler Avenue, BSN 3403
Dept. of Finance
Tampa, FL 33620-5500
United States
813-974-6300 (Phone)
813-974-3030 (Fax)

HOME PAGE: http://www.coba.usf.edu/departments/finance/facult

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