Bootstrap Panel Granger-Causality Between Government Budget and External Deficits for the EU

Antonio Afonso and Christophe Rault

No 2009/02, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: We investigate the existence of Granger-causality between current account and government budget balances over the period 1970-2007, for different EU and OECD country groupings. We use a panel-data approach based on SUR systems and Wald tests with country specific bootstrap critical values. Our results show a causal relation from budget deficits to current account deficits for several EU countries: Bulgaria, Czech Republic, Estonia, Finland, France, Italy, Hungary, Lithuania, Poland, and Slovakia, along the lines of the so-called twin-deficit relationship. Considering the effective real exchange rate in the SUR system does not substantially alter the results.

Keywords: panel causality tests; budget deficit; external imbalance; real exchange rates; EU; OECD. (search for similar items in EconPapers)
JEL-codes: C23 E62 F32 H62 (search for similar items in EconPapers)
Date: 2009-01
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Journal Article: Bootstrap panel granger-causality between government budget and external deficits for the EU (2009)
Working Paper: Bootstrap Panel Granger-Causality between Government Budget and External Deficits for the EU (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp22009

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