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Fiscal Policy and the External Deficit: Siblings, but not Twins

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  • John F. Helliwell

Abstract

This paper first surveys a number of partial and macroeconomic approaches to the determination of the current account, and then summarizes the evidence from multicountry economic models about the linkages between U.S. government spending and the U.S. current account during the 1 980s. The available evidence from a large number of multicountry models suggests that the U.S. fiscal policy of the first half of the 1980s was responsible for about half of the buildup in the external deficit, and that the accumulated net foreign debt is about 500 billion dollars higher than it would have been without the fiscal expansion.

Suggested Citation

  • John F. Helliwell, 1990. "Fiscal Policy and the External Deficit: Siblings, but not Twins," NBER Working Papers 3313, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3313
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    References listed on IDEAS

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    1. Barro, Robert J, 1989. "The Ricardian Approach to Budget Deficits," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 37-54, Spring.
    2. William H. Branson & Richard C. Marston, 1989. "Price and Output Adjustment in Japanese Manufacturing," NBER Working Papers 2878, National Bureau of Economic Research, Inc.
    3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    4. Ralph C. Bryant & John F. Helliwell & Peter Hooper, 1989. "Domestic and cross-border consequences of U.S. macroeconomic policies," International Finance Discussion Papers 344, Board of Governors of the Federal Reserve System (U.S.), revised 1989.
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    Cited by:

    1. Adrian W. Throop, 1991. "Fiscal policy in the Reagan years: a burden on future generations?," Economic Review, Federal Reserve Bank of San Francisco, issue Win, pages 3-23.
    2. Norman S. Fieleke, 1990. "The United States in debt," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 34-54.
    3. Tatsuji Hayakawa & Paul Zak, 2002. "Debt, Death and Taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(2), pages 157-173, March.

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