Productivity shocks, budget deficits and the current account

Marcel Fratzscher, Gernot Müller and Matthieu Bussiere

No 509, Working Paper Series from European Central Bank

Abstract: Currently the U.S. is experiencing record budget and current account deficits, a phenomenon familiar from the "Twin Deficits" discussion of the 1980s. In contrast, during the 1990s productivity growth has been identified as the primary cause of the US current account deficit. We suggest a theoretical framework which allows to evaluate empirically the relative importance of budget deficits and productivity shocks for the determination of the current account. Using a sample of 21 OECD countries and time series data from 1960 to 2003 we find little evidence for a contemporaneous effect of budget deficits on the current account, while country-specific productivity shocks appear to play a key role. JEL Classification: E62, F32, F41

Keywords: budget deficit; current account; investment; productivity (search for similar items in EconPapers)
Date: 2005-08
Note: 335955
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (68)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp509.pdf (application/pdf)

Related works:
Journal Article: Productivity shocks, budget deficits and the current account (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2005509

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().