Fiscal Policy and the Current Account
S. M. Abbas (),
Antonio Fatas (),
Paolo Mauro () and
Ricardo C. Velloso
No 7859, CEPR Discussion Papers from C.E.P.R. Discussion Papers
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 auto-regressions, 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: current account; exchange rate; external imbalances; fiscal policy (search for similar items in EconPapers)
JEL-codes: C01 C40 E60 E61 E62 E65 (search for similar items in EconPapers)
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Journal Article: Fiscal Policy and the Current Account (2011)
Working Paper: Fiscal Policy and the Current Account (2010)
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