Budget Deficits and Current Account in Japan and the U.S.: An Empirical Evidence on the Twin Deficits Hypothesis
This paper theoretically examines the mechanism of the occurrence of gtwin deficitsh, which means that the budget balance influences the current account, and quantitatively analyzes the probability of the occurrence. Specifically, the author studies the cases of Japan and the U.S. to demonstrate that changes in liquidity constraint in households play an important role in the occurrence of twin deficits. The quantitative analysis indicates that Japan is likely to have had the mechanism where the deteriorating budget balance negatively influenced the current account in the 1990fs, but not as far as turning it into a deficit. On the other hand, in the U.S., the rapid expansion of the budget deficits since 2007 seems to have deteriorated the current account, which implies the occurrence of twin deficits.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Jun 2010|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.econ.kobe-u.ac.jp|
More information through EDIRC
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.:
- Ogawa, Kazuo, 1990. "Cyclical variations in liquidity-constrained consumers: Evidence from macro data in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 4(2), pages 173-193, June.
- Menzie David Chinn & Eswar Prasad, 2000.
"Medium-Term Determinants of Current Accounts in Industrial and Developing Countries; An Empirical Exploration,"
IMF Working Papers
00/46, International Monetary Fund.
- 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.
- 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.
- Michele Cavallo, 2005. "Understanding the twin deficits: new approaches, new results," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jul22.
- 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.
- António Afonso & Christophe Rault, 2009.
"Budgetary and External Imbalances Relationship: A Panel Data Diagnostic,"
CESifo Working Paper Series
2559, CESifo Group Munich.
- António AFONSO & Christophe RAULT, 2010. "Budgetary and External Imbalances Relationship: a Panel Data Diagnostic," Working Papers 283, Orleans Economic Laboratorys, University of Orleans.
- António Afonso & Christophe Rault, 2008. "Budgetary and External Imbalances Relationship : a Panel Data Diagnostic," Working Papers Department of Economics 2008/45, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- Afonso, António & Rault, Christophe, 2008. "Budgetary and external imbalances relationship: a panel data diagnostic," Working Paper Series 0961, European Central Bank.
- Matsubayashi, Yoichi, 2006. "Structural and cyclical movements of the current account in Japan: An alternative measure," Japan and the World Economy, Elsevier, vol. 18(4), pages 545-567, 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.
- Lori Leachman & Bill Francis, 2002. "Twin Deficits: Apparition or Reality?," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1121-1132.
- Hayashi, Fumio, 1982. "The Permanent Income Hypothesis: Estimation and Testing by Instrumental Variables," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 895-916, October.
- Aoki, Kosuke & James Proudman & Gertjan Vlieghe, 2003.
"House prices, consumption, and monetary policy: a financial accelerator approach,"
Royal Economic Society Annual Conference 2003
7, Royal Economic Society.
- Aoki, Kosuke & Proudman, James & Vlieghe, Gertjan, 2004. "House prices, consumption, and monetary policy: a financial accelerator approach," Journal of Financial Intermediation, Elsevier, vol. 13(4), pages 414-435, October.
- Kosuke Aoki & James Proudman & Gertjan Vlieghe, 2002. "House prices, consumption, and monetary policy: a financial accelerator approach," Bank of England working papers 169, Bank of England.
- 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, 1996. "Budget Deficit Persistence and the Twin Deficits Hypothesis," Macroeconomics 9607001, EconWPA.
- 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.
- Gruber, Joseph W., 2004. "A present value test of habits and the current account," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1495-1507, October.
- 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.
- Jeffrey A. Rosensweig & Ellis W. Tallman, 1991.
"Fiscal policy and trade adjustment: are the deficits really twins?,"
91-2, Federal Reserve Bank of Atlanta.
- Rosenswieg, Jeffrey A & Tallman, Ellis W, 1993. "Fiscal Policy and Trade Adjustment: Are the Deficits Really Twins?," Economic Inquiry, Western Economic Association International, vol. 31(4), pages 580-94, October.
When requesting a correction, please mention this item's handle: RePEc:koe:wpaper:1010. 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: (Kimiaki Shirahama)
If references are entirely missing, you can add them using this form.