Fiscal Policy and the Current Account

1986 ◽  
Vol 1 (3) ◽  
pp. 711 ◽  
Author(s):  
Jose Vinals ◽  
Patrick Minford ◽  
Jacques Melitz
Keyword(s):  
Fiscal Policy ◽  
Current Account ◽  
The Current Account

Fiscal policy and the current account: are microstates different?

2013 ◽  
Vol 45 (29) ◽  
pp. 4137-4151
Author(s):  
Yehenew Endegnanew ◽  
Charles Amo-Yartey ◽  
Therese Turner-Jones
Keyword(s):  
Fiscal Policy ◽  
Current Account ◽  
The Current Account

What Explains Current Account Surplus in Korea?

2018 ◽  
Vol 17 (2) ◽  
pp. 70-93
Author(s):  
Chirok Han ◽  
Kwanho Shin
Keyword(s):  
Exchange Rate ◽  
Fiscal Policy ◽  
Current Account ◽  
Current Account Balance ◽  
Budget Deficits ◽  
Current Account Surplus ◽  
Short Run ◽  
The Right ◽  
The Impact ◽  
The Current Account

Since the currency crisis in 1998, Korea has experienced continuous current account surpluses. Recently, the current account surplus increased more rapidly—amounting to 7.7 percent of GDP in 2015. In this paper, we investigate the underlying reasons for the widening of Korea's current account surpluses. We find that the upward trend in Korea's current account surpluses is largely explained by its demographical changes. Other economic variables are only helpful when explaining short run fluctuations in current account balances. Moreover, we show that Korea's current account surplus is expected to disappear by 2042 as it becomes one of the most aged economies in the world. Demographic changes are so powerful that they explain, quite successfully, the current account balance trends of other economies with highly aged populations such as Japan, Germany, Italy, Finland, and Greece. When we add the real exchange rate as an additional explanatory variable, it is statistically significant with the right sign, but the magnitude explained by it is quite limited. For example, to reduce the current account surplus by 1 percentage point, a 12 percent depreciation is needed. If Korea's current exchange rate is undervalued 4 to 12 percent less than the level consistent with fundamentals, it is impossible to reduce Korea's current account surplus to a reasonable level by adjusting the exchange rate alone. Another way to reduce current account surplus is to expand fiscal policies. We find, however, that the impact of fiscal adjustments in reducing current account surplus is even more limited. According to our estimates, reducing the current account surplus by 1 percentage point requires an increase in budget deficits (as a ratio to GDP) of 5 to 6 percentage points. If we allow endogenous movements of exchange rate and fiscal policy, the impact of exchange rate adjustment increases by 1.6 times but that of fiscal policy decreases that it is no longer statistically significant.

scholarly journals The Twin Deficits Phenomenon: Evidence from Pakistan

2000 ◽  
Vol 39 (4II) ◽  
pp. 535-550 ◽  
Author(s):  
Anjum Aqeel ◽  
Mohammed Nishat
Keyword(s):  
Fiscal Policy ◽  
Current Account ◽  
Budget Deficit ◽  
Current Account Deficit ◽  
Theoretical Work ◽  
Current Account Balance ◽  
Improved Performance ◽  
Necessary And Sufficient ◽  
The Relationship ◽  
The Current Account

Like most developing countries a steady budget deficit in Pakistan is the primary cause of all major ills of the economy. It has varied between 5.4 to 8.7 percent during last two decades. On the other hand the current account deficit varied between 2.7 to 7.2 percent during the same period. The variations in fiscal policy can lead to predictable developments in an open economy’s performance on current account, remains a controversial issue. An important aspect of this issue concerns what is termed as twin deficit analysis, according to which fiscal deficits and current account balances are very closely related so that reductions in the former are both necessary and sufficient to obtain improved performance in the later. Theoretical work on the relationship that exist between variations in fiscal policy and the current account balance has been based upon two types of models. These models are constructed from postulated behavioural relationships that purport to describe how the economy works in aggregate without explaining the behaviour of agents who make up the economy [Mundel (1963); Branson (1976); Dornbusch (1976); Kawai (1985) and Marston (1985)]. The second type of model, derives the important macroeconomic relationships from the microfoundations of individual optimising behaviour [Dixit (1978); Neary (1980); Obstfeld (1981); Persson (1982); Kimbrough (1985); Frenkel and Razin (1986); Cuddington and Vinals (1985, 1986a) and Moore (1989)]. However, both of these approaches have yielded divergent results.

scholarly journals Fiscal Policy and the Current Account

2010 ◽  
Author(s):  
S. M. Ali Abbas ◽  
Jacques Bouhga-Hagbe ◽  
Antonio Fatas ◽  
Paolo Mauro ◽  
Ricardo Velloso
Keyword(s):  
Fiscal Policy ◽  
Current Account ◽  
The Current Account

scholarly journals The IMF supported program in Serbia & Montenegro

2004 ◽  
Vol 44 (161) ◽  
pp. 7-62
Author(s):  
Dijana Dragutinovic
Keyword(s):  
Fiscal Policy ◽  
Current Account ◽  
Institutional Environment ◽  
Current Account Deficit ◽  
Executive Board ◽  
Post Conflict ◽  
Short Run ◽  
Cash Basis ◽  
The Current Account ◽  
The Imf

On December 20, 2000 Yugoslavia was readmitted to the IMF, which led to the approval of emergency post conflict assistance. On June 11, 2001, the Executive Board of the IMF approved a Stand-by arrangement. On May 13, 2002 the Executive Board of the IMF approved an Extended Arrangement. In general the IMF supported programs are focused on the following: (I) restrained fiscal policy; (II) consistent monetary and exchange rate policies; (III) wage and price policies; and (IV) structural policy. In the period from 2001 to 2003, considerable progress was made in the creation of an appropriate institutional environment for the operation of a market economy. Serbia & Montenegro is growing at rate that are about twice as large as EU growth rate; however, after a two year period of recovery and accelerated reforms 2003 has seen a slowing in the rate of economic growth. Although inflation was relatively low in 2003, large imbalances continued: (I) the fiscal deficit amounted to 4.2 percent of GDP on a cash basis; (II). the current account deficit was 12.5 percent of GDP. Having in mind two potential causes of macroeconomic instability, discussions between the IMF and country authorities focused on the need to tighten fiscal policy to reduce the pace of domestic demand and improve the current account deficit in the short run.

scholarly journals Fiscal Policy and the Current Account

2011 ◽  
Vol 59 (4) ◽  
pp. 603-629 ◽  
Author(s):  
S M Ali Abbas ◽  
Jacques Bouhga-Hagbe ◽  
Antonio Fatás ◽  
Paolo Mauro ◽  
Ricardo C Velloso
Keyword(s):  
Fiscal Policy ◽  
Current Account ◽  
The Current Account
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