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Fiscal Policy and the Current Account

International Monetary Fund
Authors registered in the RePEc Author Service: Antonio Fatas (), Paolo Mauro () and S. M. Ali Abbas ()

No 10/121, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the relationship between fiscal policy and the current account, drawing on a larger country sample than in previous studies and using panel regressions, vector autoregressions, and an analysis of large fiscal and external adjustments. On average, a strengthening in the fiscal balance by 1 percentage point of GDP is associated with a current account improvement of 0.2–0.3 percentage point of GDP. This association is as strong in emerging and low-income countries as it is in advanced economies; and significantly higher when output is above potential.

Keywords: Economic models; Exchange rates; Nonoil developing countries; Oil exporting countries; Taxation; current account, fiscal policy, fiscal balance, government spending, budget balance, government budget, fiscal expansions, current account balance, budget deficit, fiscal expansion, fiscal contractions, budget deficits, fiscal balances, current account balances, government budget deficit, tax policy, fiscal deficits, fiscal contraction, aggregate demand, fiscal shocks, public debt, government budget balance, current account deficits, fiscal consolidation, account deficits, expansionary fiscal, fiscal tightening, tax increases, public spending, current account deficit, fiscal policies, budget surplus, foreign debt, current accounts, fiscal deficit, fiscal stance, expansionary fiscal contractions, fiscal shock, fiscal affairs, tax cut, public finances, fiscal affairs department, fiscal adjustments, fiscal impetus, fiscal adjustment, budget balances, government deficit, fiscal years, fiscal revenues, government debt, foreign currency debt, government solvency, external debt, central bank, tax base, fiscal policy action, tax changes, structural fiscal, reserve bank, government spending shocks, fiscal solvency, tax cuts, domestic savings, fiscal stimulus, domestic absorption, fiscal ? stance, debt relief, fiscal variables, primary budget balance, fiscal profligacy, debt problems, currency debt, foreign aid, tax revenues, budget support, balance of payments (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-opm
Date: 2010-05-01
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Related works:
Journal Article: Fiscal Policy and the Current Account (2011) Downloads
Working Paper: Fiscal Policy and the Current Account (2010) Downloads
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