Considerações teóricas e empíricas acerca da relação entre déficit público e déficit externo

Taiana Fortunato Araujo, Alessandra Coelho de Oliveira, Marco Flávio Cunha Resende and Sueli Moro
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Taiana Fortunato Araujo: Cedeplar-UFMG
Alessandra Coelho de Oliveira: Cedeplar-UFMG
Sueli Moro: Cedeplar-UFMG

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Abstract: A consensus has not yet emerged about the relationship between budget deficit, external deficit and national saving. According to mainstream economic literature, the budget deficit can cause an insufficiency of national saving for a given investment rate. In such cases, the investment rate will not be reduced if foreign saving is absorbed, thus causing an external deficit. This is the twin deficits hypothesis. However, there are theoretical and empirical studies, which do not corroborate the twin deficits hypothesis. This paper concludes that there is no regular causal relationship between public deficits and external deficits. This conclusion is empirically conformed by means of estimating a panel data model for 35 countries during the 1991-2000 period.

Keywords: twin deficits; real exchange rate; panel data (search for similar items in EconPapers)
JEL-codes: C23 E62 F41 (search for similar items in EconPapers)
Date: 2007-08

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