Fiscal Policy and the Current Account

International Monetary Fund

No 2010/121, 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: WP; GDP (search for similar items in EconPapers)
Pages: 30
Date: 2010-05-01
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Citations: View citations in EconPapers (29)

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