LONG-RUN RELATIONSHIP BETWEEN EXPORTS AND IMPORTS IN TRANSITION EUROPEAN COUNTRIES

An important aspect of macroeconomic policy is to monitor the time path of the current account, which can be considered as a measure of national net indebtedness. If current account defi cit is stationary, the external debt is sustainable. In this paper we test the long-run relationship between imports and exports in sixteen transition European countries, using quarterly data from different years in the 1990s to the end of 2006. In order to test the possible cointegration between exports and import in the sample countries, we apply the Johansen approach. We find existence of cointegration in 10 out of 16 analyzed countries. However, restrictions on long run coefficient suggest that current account deficit is sustainable only in 5 countries.