Budgetary and External Imbalances Relationship: A Panel Data Diagnostic

Antonio Afonso and Christophe Rault ()

No CESifo Working Paper No. 2559, CESifo Working Paper Series from CESifo Group Munich

Abstract: We assess the cointegration relationship between current account and budget balances, and effective real exchange rates, using recent bootstrap panel cointegration techniques and SUR methods. We investigate the magnitude of the relationship between the two imbalances for each country for the period 1970-2007, and for different EU and OECD country groupings. The panel cointegration tests used allow for within and between correlation, while the SUR results show both positive and negative effects of budget balances on current account balances for several countries. The magnitude of the effects varies across countries, and there is no evidence pointing to a direct and close relationship between budgetary and current account balances.

Keywords: budget balance; external balance; EU; panel cointegration (search for similar items in EconPapers)
JEL-codes: C23 E62 F32 H62 (search for similar items in EconPapers)
Date: 2009
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Related works:
Working Paper: Budgetary and external imbalances relationship - a panel data diagnostic (2008)
Working Paper: Budgetary and External Imbalances Relationship: a Panel Data Diagnostic (2008)
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