Fiscal Imbalances and Current Account Adjustments in the European Transition Economies
AbstractOrigins and implications of twin deficits occurrence in a large scale of countries seems to be a center of rigorous empirical as well as theoretical investigation for decades. The reality of persisting fiscal and current account deficits became obvious in many advanced as well as advancing, emerging and low-income countries seemingly without a direct association with the phase of business cycle or trends in key fundamental indicators. European transition economies experienced current account deficits during the most of the pre-crisis period. Despite generally improved economic environment and high rates of economic growth it seems that countries with weaker nominal anchor experienced periods of persisting fiscal imbalances during the most of the pre-crisis period. Crises period affected both fiscal stance of government budgets and current account pre-crisis levels and trends in all countries from the group. As a result, leading path of both indicators significantly changed. In the paper we analyze effects of fiscal policies on current accounts in the European transition economies. Our main objective is to investigate causal relationship between fiscal policy discretionary changes and associated current account adjustments. We identify episodes of large current account and fiscal policy changes to provide an in-depth insight into frequency as well as parallel occurrence of deteriorations (improvements) in current accounts and fiscal stance of government budgets. From employed VAR model we estimate responses of current accounts in each individual country to the cyclically adjusted primary balance shocks.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 50362.
Date of creation: Aug 2013
Date of revision:
Publication status: Published in Journal of Applied Economic Sciences 3.8(2013): pp. 323-352
fiscal imbalances; current account adjustments; economic crisis; vector autoregression; impulse-response function;
Other versions of this item:
- Rajmund MIRDALA, 2013. "Fiscal Imbalances And Current Account Adjustments In The European Transition Economies," Journal of Applied Economic Sciences Quarterly, ASERS Publishing, vol. 0(3), pages 323-352, October.
- Rajmund Mirdala, 2013. "Fiscal Imbalances and Current Account Adjustments in the European Transition Economies," William Davidson Institute Working Papers Series wp1065, William Davidson Institute at the University of Michigan.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
- NEP-EEC-2013-10-18 (European Economics)
- NEP-MAC-2013-10-18 (Macroeconomics)
- NEP-OPM-2013-10-18 (Open Economy Macroeconomics)
- NEP-PBE-2013-10-18 (Public Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Glick, Reuven & Rogoff, Kenneth, 1995.
"Global versus country-specific productivity shocks and the current account,"
Journal of Monetary Economics,
Elsevier, vol. 35(1), pages 159-192, February.
- Reuven Glick & Kenneth Rogoff, 1993. "Global versus country-specific productivity shocks and the current account," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 443, Board of Governors of the Federal Reserve System (U.S.).
- Reuven Glick & Kenneth Rogoff, 1992. "Global Versus Country-Specific Productivity Shocks and the Current Account," NBER Working Papers 4140, National Bureau of Economic Research, Inc.
- Reuven Glick & Kenneth Rogoff, 1993. "Global Versus Country-Specific Productivity Shocks and the Current Acocount," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 31, Boston University, Institute for Economic Development.
- Reuven Glick & Kenneth Rogoff, 1992. "Global versus country-specific productivity shocks and the current account," Working Papers in Applied Economic Theory 92-06, Federal Reserve Bank of San Francisco.
- Kim, Soyoung & Roubini, Nouriel, 2008.
"Twin deficit or twin divergence? Fiscal policy, current account, and real exchange rate in the U.S,"
Journal of International Economics,
Elsevier, vol. 74(2), pages 362-383, March.
- Soyoung Kim & Nouriel Roubini, 2004. "Twin Deficit or Twin Divergence? Fiscal Policy, Current Account, and Real Exchange Rate in the US," Econometric Society 2004 North American Winter Meetings 271, Econometric Society.
- Bussière, Matthieu & Fratzscher, Marcel & Müller, Gernot J., 2004. "Current accounts dynamics in OECD and EU acceding countries - an intertemporal approach," Working Paper Series 0311, European Central Bank.
- Michael G. Arghyrou & Georgios Chortareas, 2008.
"Current Account Imbalances and Real Exchange Rates in the Euro Area,"
Review of International Economics,
Wiley Blackwell, vol. 16(4), pages 747-764, 09.
- Arghyrou, Michael G & Chortareas, Georgios, 2006. "Current Account Imbalances and Real Exchange Rates in the Euro Area," Cardiff Economics Working Papers E2006/23, Cardiff University, Cardiff Business School, Economics Section.
- Ali Abbas, S.M. & Bouhga-Hagbe, Jacques & Fatás, Antonio & Mauro, Paolo & Velloso, Ricardo C., 2010.
"Fiscal Policy and the Current Account,"
CEPR Discussion Papers
7859, C.E.P.R. Discussion Papers.
- Mirdala, Rajmund, 2013.
"Lessons Learned from Tax versus Expenditure Based Fiscal Consolidation in the European Transition Economies,"
46792, University Library of Munich, Germany.
- Rajmund MIRDALA, 2013. "Lessons Learned From Tax Versus Expenditure Based Fiscal Consolidation In The European Transition Economies," Journal of Applied Economic Sciences Quarterly, ASERS Publishing, vol. 0(1), pages 73-98, April.
- Maurice Obstfeld & Kenneth Rogoff, 1994.
"The Intertemporal Approach to the Current Account,"
NBER Working Papers
4893, National Bureau of Economic Research, Inc.
- Maurice Obstfeld and Kenneth Rogoff., 1994. "The Intertemporal Approach to the Current Account," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C94-044, University of California at Berkeley.
- Giancarlo Corsetti & Gernot J. MÃ¼ller, 2006.
"Twin deficits: squaring theory, evidence and common sense,"
Economic Policy, CEPR;CES;MSH,
CEPR;CES;MSH, vol. 21(48), pages 597-638, October.
- Giancarlo Corsetti & Gernot J. Müller, 2005. "Twin Deficits: Squaring Theory, Evidence and Common Sense," Economics Working Papers ECO2005/22, European University Institute.
- Altar, Moisa & Necula, Ciprian & Bobeica, Gabriel, 2010. "Estimating The Cyclically Adjusted Budget Balance For The Romanian Economy. A Robust Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 79-99, July.
- Lee, Jaewoo & Chinn, Menzie D., 2006.
"Current account and real exchange rate dynamics in the G7 countries,"
Journal of International Money and Finance,
Elsevier, vol. 25(2), pages 257-274, March.
- Lee,J. & Chinn,M.D., 2004. "Current account and real exchange rate dynamics in the G-7 countries," Working papers, Wisconsin Madison - Social Systems 11, Wisconsin Madison - Social Systems.
- Menzie David Chinn & Jaewoo Lee, 2002. "Current Account and Real Exchange Rate Dynamics in the G-7 Countries," IMF Working Papers 02/130, International Monetary Fund.
- Mirdala, Rajmund, 2013. "Current Account Adjustments and Real Exchange Rates in the European Transition Economies," MPRA Paper 48901, University Library of Munich, Germany.
- Roubini, N., 1989.
"Current Account And Budget Deficits In An Intertemporal Model Of Consumption And Taxation Smoothing. A Solution To The "Feldstein-Horioka" Puzzel,"
Papers, Yale - Economic Growth Center
569, Yale - Economic Growth Center.
- Nouriel Roubini, 1988. "Current Account and Budget Deficits in an Intertemporal Model of Consumption and Taxation Smoothing. A Solution to the "Feldstein-Horioka Puzzle"?," NBER Working Papers 2773, National Bureau of Economic Research, Inc.
- Kenneth Rogoff & William Brainard & George Perry, .
"Global Current Account Imbalances and Exchange Rate Adjustments,"
33687, Harvard University OpenScholar.
- Maurice Obstfeld & Kenneth S. Rogoff, 2005. "Global Current Account Imbalances and Exchange Rate Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(1), pages 67-146.
- Menzie D. Chinn & Eswar S. Prasad, 2000.
"Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration,"
NBER Working Papers
7581, National Bureau of Economic Research, Inc.
- Chinn, Menzie D. & Prasad, Eswar S., 2003. "Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration," Journal of International Economics, Elsevier, vol. 59(1), pages 47-76, January.
- Hassan Mohammadi, 2004. "Budget deficits and the current account balance: New evidence from panel data," Journal of Economics and Finance, Springer, vol. 28(1), pages 39-45, March.
- Javid, Attiya Y. & Javid, Muhammad & Arif, Umaima, 2011. "Fiscal Policy and Current Account Dynamics in Case of Pakistan," MPRA Paper 34858, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.