Does Fiscal Policy Matter for the Trade Account? A Panel Cointegration Study
This paper analyzes the empirical relationship between fiscal policy and the trade account. Research prior to this paper did not consider that the components of private and public demand in the import demand equation exhibit different elasticities. Using pooled mean group estimation for annual panel data of the G-7 countries for the years 1970 through 2002, we provide empirical evidence that the composition of overall demand-i.e., the distribution among public demand, private demand, and export demand-has an impact on the magnitude of the trade account deficit.
|Date of creation:||01 Jun 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
References listed on IDEAS
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.:
- Fatás, Antonio & Mihov, Ilian, 2001. "The Effects of Fiscal Policy on Consumption and Employment: Theory and Evidence," CEPR Discussion Papers 2760, C.E.P.R. Discussion Papers.
- Michel Normandin, 1996.
"Budget Deficit Persistence and the Twin Deficits Hypothesis,"
- Normandin, Michel, 1999. "Budget deficit persistence and the twin deficits hypothesis," Journal of International Economics, Elsevier, vol. 49(1), pages 171-193, October.
- Michel Normandin, 1994. "Budget Deficit Persistence and the Twin Deficits Hypothesis," Cahiers de recherche CREFE / CREFE Working Papers 31, CREFE, Université du Québec à Montréal.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995.
"Testing for Unit Roots in Heterogeneous Panels,"
Cambridge Working Papers in Economics
9526, Faculty of Economics, University of Cambridge.
- Caporale, Guglielmo Maria & Chui, Michael K F, 1999. "Estimating Income and Price Elasticities of Trade in a Cointegration Framework," Review of International Economics, Wiley Blackwell, vol. 7(2), pages 254-64, May.
- Bussière, Matthieu & Fratzscher, Marcel & Müller, Gernot J., 2005.
"Productivity shocks, budget deficits and the current account,"
Working Paper Series
0509, European Central Bank.
- Bussière, Matthieu & Fratzscher, Marcel & Müller, Gernot J., 2010. "Productivity shocks, budget deficits and the current account," Journal of International Money and Finance, Elsevier, vol. 29(8), pages 1562-1579, December.
- Enders, Walter & Lee, Bong-Soo, 1990. "Current Account and Budget Deficits: Twins or Distant Cousins?," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 373-81, August.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Olivier Blanchard & Roberto Perotti, 1999.
"An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output,"
NBER Working Papers
7269, National Bureau of Economic Research, Inc.
- Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization Of The Dynamic Effects Of Changes In Government Spending And Taxes On Output," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1329-1368, November.
- Goldstein, Morris & Khan, Mohsin S., 1985. "Income and price effects in foreign trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 20, pages 1041-1105 Elsevier.
- 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.
- Lane, Philip R. & Perotti, Roberto, 1998. "The trade balance and fiscal policy in the OECD," European Economic Review, Elsevier, vol. 42(3-5), pages 887-895, May.
- Piersanti, Giovanni, 2000. "Current account dynamics and expected future budget deficits: some international evidence," Journal of International Money and Finance, Elsevier, vol. 19(2), pages 255-271, April.
- 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.
- 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.
- Michele Cavallo, 2005. "Understanding the twin deficits: new approaches, new results," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jul22.
- Christopher Erceg & Luca Guerrieri, 2005.
"Expansionary Fiscal Shocks and the Trade Deficit,"
Computing in Economics and Finance 2005
128, Society for Computational Economics.
- Baxter, M., 1994.
"International Trade and Business Cycles,"
RCER Working Papers
390, University of Rochester - Center for Economic Research (RCER).
- Karras, Georgios, 1994. "Government Spending and Private Consumption: Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 9-22, February.
- Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002.
"Unit root tests in panel data: asymptotic and finite-sample properties,"
Journal of Econometrics,
Elsevier, vol. 108(1), pages 1-24, May.
- Tom Doan, . "LEVINLIN: RATS procedure to perform Levin-Lin-Chu test for unit roots in panel data," Statistical Software Components RTS00242, Boston College Department of Economics.
- Baxter, Marianne, 1995. "International trade and business cycles," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 35, pages 1801-1864 Elsevier.
- B. Douglas Bernheim, 1988. "Budget Deficits and the Balance of Trade," NBER Chapters, in: Tax Policy and the Economy: Volume 2, pages 1-32 National Bureau of Economic Research, Inc.
- Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:06/147. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.