Fiscal Expansion and External Current Account Balance

International Monetary Fund

No 1988/100, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes, in a general equilibrium framework, how fiscal policy transmits its effects to the current account of the balance of payments. In discussing the role of fiscal policies in the Fund’s stabilization programs, the paper compares different approaches to explain the determination of the external balance. The model presented here is based on intertemporal optimization and focuses on the behavior of private and public agents. Some empirical evidence is also presented, based on data from ten Latin American countries. Finally, an appendix presents an integrated system of financial, external, and government accounts.

Keywords: WP; government expenditure; real GDP; exchange rate; capital stock; current account of the balance of payments; consumption function; terms of trade; Current account balance; Current account; Private savings; South America (search for similar items in EconPapers)
Pages: 46
Date: 1988-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1988/100

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