Bütçe açığının cari işlemler üzerindeki etkileri: Teori ve uygulama

The effects of budget deficit on current account balance: Theory and empirical evidence

Faik Bilgili and Emine Bilgili

MPRA Paper from University Library of Munich, Germany

Abstract: In this study, we examine if there is a linkage between the budget deficit (BD) and current account deficit (CAP). Traditional theory asserts that the BD leads to CAD, given that government expenditures are fixed. As disposable income increases due to BD (i.e., due to tax-cuts given that there is no corresponding reduction in government spending), consumers will choose to spend most of the increase in their disposable income. This will cause interest rates to increase via increase (rightward shift) in Investment-Saving (IS) curve. As a result of this, the domestic currency appreciates and net exports decline. Thus, BD causes CAD. The new Classical approach, on the other hand, argues that government debt or tax reductions imply future tax liabilities. This approach assumes that infinitely-lived consumers foresee the future tax liabilities, and, that consumers with rational expectations, therefore, will not increase their consumption level even if their income increases due to government debt or tax-cuts. Thus, there is no link between BAD and CD. In this study, the analyses were carried out by estimating current account equations using time series data for Turkey, Singapore and the USA. The result of this study demonstrates that the budget balance has had no significant impact on current account balance.

Keywords: Budget deficit; foreign trade deficit; twin deficits; traditional approach; new classical and Ricardian approaches (search for similar items in EconPapers)
JEL-codes: B21 B22 C11 C12 C13 C30 D11 D14 D40 D52 E1 E2 E3 E4 (search for similar items in EconPapers)
Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published in İktisat, İşletme ve Finans, 146. sayının eki 146.13(1998): pp. 4-16

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/80866/1/MPRA_paper_80866.pdf original version (application/pdf)

Related works:
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:pra:mprapa:80866

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().