“Twins” or just “siblings”? budget and current account deficits in Europe, 1870-203

• Georgios Karras ^[1]
  1. [1] University of Illinois at Chicago

     University of Illinois at Chicago

     City of Chicago, Estados Unidos

     
• Localización: Applied econometrics and international development, ISSN 1578-4487, Vol. 19, Nº. 1, 2019, págs. 33-42
• Idioma: inglés
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• Resumen

  • Using data for twelve European countries over the period 1870-2013, the response of the current account balance to the budget deficit is found to be inverse-hump-shaped: an increase in the budget deficit results in a current account deterioration that is sizeable but less than one-to-one (so the two balances are “siblings” rather than “twins”), and persistent but temporary. Specifically, an increase in the fiscal deficit by 1% of GDP results in deterioration of the current account that peaks at about 0.25% of GDP but dies out after a maximum of ten years