Sustainability of current account for Latin America and Caribbean countries

Abstract

This article examines sustainability of current account for Colombia, Peru, Venezuela, Mexico, Brazil and Argentina. Using the usual intertemporal borrowing constraint, we have tested for a long-run relationship between exports and imports plus net transfer payments and net interest payments. In our empirical analysis of the sustainability of current account, cointegration approaches have been used. Empirical results suggest that in the case of Peru, there exists a unique long run or equilibrium relationship among real exports and imports. In the case of Colombia, Venezuela, Mexico, Brazil and Argentina, cointegration results suggest that these countries' current accounts are not sustainable in the long run.