Current Account Sustainability: A Non-linear Comparative Empirical Overview

This study aims to examine the sustainability of current account deficits for Hungary, Poland, Czech Republic and Turkey over the period 1998Q1:2014:2, with a special attention to the Turkish case, by applying the theoretical model of Steven Husted (1992). The main motive for the choice of time span is that the period comprises the outcomes of two important crises Turkish economy experienced in 2001 and 2008. The empirical testing procedure of the sustainability is two-fold so as to be linear and nonlinear. Both linear and nonlinear test results provide evidence that the current account deficit is unsustainable for Turkey, Poland and Czech Republic. On the other hand, linear and nonlinear test results lead to a conflicting evidence for Hungary. We conclude that there is a need to reduce the current account deficit for the countries examined. Otherwise, a sharp adjustment may be inevitable. Key words: current account, sustainability, co-integration, nonlinearity. JEL: C32, F32. Održivost tekuceg racuna: Nelinearni komparativni empirijski pregled Rad ima za cilj da ispita održivost deficita tekuceg racuna za Mađarsku, Poljsku, Cesku Republiku i Tursku tokom perioda 1998Q1: 2014Q2, sa posebnom pažnjom na slucaj Turske, primenom teorijskog modela Stevena Husteda (1992). Glavni motiv za izbor vremenskog perioda je da period obuhvata rezultate dve važne krize turske privrede koje su se desile 2001. i 2008. godine. Postupak empirijskog testiranja održivosti je dvostruko, linearni i nelinearni. Rezultati linearnog i nelinearnog testa pokazuju da je deficit tekuceg racuna Turske, Poljske i Ceske neodrživ. Sa druge strane, rezultati linearnih i nelinearnih testova dovode do konfliktnih dokaza za Mađarsku. Zakljucujemo da postoji potreba da se smanji deficit tekuceg racuna za ispitane zemlje. U suprotnom, ostro podesavanje može biti neizbežno. Kljucne reci: Tekuci racun, održivost, kointegracija, nelinearnost.