Causality between external balance and (some) fiscal variables: Preliminary results for the Eurozone

• Carlos Alberto Carrasco ^[1]
  1. [1] Universidad de Monterrey

     Universidad de Monterrey

     México

     
• Localización: Economics and Business Letters, ISSN-e 2254-4380, Vol. 5, Nº. 3, 2016, págs. 80-86
• Idioma: inglés
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• Resumen

  • In this article, we present preliminary results, analyzing the causality between external balance and fiscal variables (primary public balance, interest paid on debt and overall public balance) within the so-called twin deficits hypothesis for a set of six Eurozone countries – three core countries (Austria, Finland and Germany) and three peripheral countries (Greece, Portugal and Spain) – in the period 1972–2011. We implement the Toda and Yamamoto (1995) approach to Granger non-causality testing (Granger, 1969). Results are not homogeneous for all the Euro-zone countries included in the sample. Evidence of causality according to the twin deficits hy-pothesis is provided only for the case of Austria. In addition, evidence of a causal relationship from interest paid on debt to external balance is provided in the case of Portugal and from external balance to interest paid on debt for Austria and Germany.