IS FINANCIAL ACCOUNT OF BALANCE OF PAYMENTS SUSTAINABLE?

Abstract

This study aims to investigate the sustainability of financial account balance of Balance of Payments (BoP) with global evidence. The sample covers 117 countries with quarterly observations ranging between 1945 and 2016. This study employs Augmented Dickey-Fuller (ADF) unit root tests with structural break. The empirical results suggest all of the sampled countries, except for China have their sustainable financial account balances. This finding is important from the policy perspective that the capital account liberalization, and macroeconomic policies are favourable in the long-run.