The intertemporal budget constraint and current account sustainability in Cyprus: Evidence and policy implications

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Pattichis, Charalambos

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Abstract	Using the recently developed ‘bounds’ testing approach, this paper provides evidence that Cyprus is not in violation of its intertemporal budget constraint and its current account balance is ‘strongly’ sustainable in the long-run. A policy implication of these findings is that the loss of exchange rate policy following the adoption of the Euro in 2008 may not be a serious cost for Cyprus. On a methodological level, the results presented in this paper support theoretical models that employ an intertemporal approach to modeling the current account. Keywords: Intertemporal budget constraint; current account sustainability; Cyprus. JEL: F320, F410
Klassifikation	Volkswirtschaftstheorie; Wirtschaftspolitik
Sprache Dokument	Englisch
Publikationsjahr	2010
Seitenangabe	S. 463-473
Zeitschriftentitel	Applied Economics, 42 (2010) 4
DOI	http://dx.doi.org/10.1080/00036840802599875
ISSN	1466-4283
Status	Postprint; begutachtet (peer reviewed)
Lizenz	PEER Licence Agreement (applicable only to documents from PEER project)