scholarly journals Testing the Twin Deficits Hypothesis: Effect of Fiscal Balance on Current Account Balance—A Panel Analysis of Sub-Saharan Africa

2016 ◽  
Vol 07 (09) ◽  
pp. 945-954 ◽  
Author(s):  
Godson Korbla Aloryito ◽  
Bernardin Senadza ◽  
Edward Nketiah-Amponsah
Keyword(s):  
Current Account ◽  
Sub Saharan Africa ◽  
Current Account Balance ◽  
Panel Analysis ◽  
Twin Deficits ◽  
Fiscal Balance ◽  
Sub Saharan

scholarly journals Contradicting the twin deficits hypothesis: The role of tax revenues composition

2014 ◽  
Vol 61 (6) ◽  
pp. 653-667 ◽  
Author(s):  
Alka Obadic ◽  
Tomislav Globan ◽  
Ozana Nadoveza
Keyword(s):  
Current Account ◽  
Economic Transformation ◽  
Current Account Balance ◽  
Twin Deficits ◽  
Main Hypothesis ◽  
Tax Revenues ◽  
Fiscal Balance ◽  
Tax Systems ◽  
The Current Account

The general theory of twin deficits hypothesis does not consider specific characteristics of domestic tax systems, i.e. whether the revenue side of the budget is dominated by indirect or by direct taxes. The main hypothesis of the paper is that in countries with fiscal systems dominated by indirect taxes, the deterioration of the current account balance would imply higher fiscal revenues due to larger imports and consumption. The hypothesis is based on the characteristics of domestic tax systems of Bulgaria, Croatia, Poland and Romania in which indirect tax revenues account for the majority of total budget tax revenues. Results suggest that the co-movements of the current account and the fiscal balance cannot be explained by the twin deficit theory in countries with indirect tax-oriented systems. These results imply that only the structural economic transformation and export orientation of the economy may reverse the causality direction between two deficits.

scholarly journals The Fiscal Policy of Bulgaria from the Standpoints of the Business Cycle and the Twin Deficits Hypothesis

2020 ◽  
Vol 6 (3) ◽  
pp. 256-269
Author(s):  
I. Todorov ◽  
◽  
K. Durova ◽  
Keyword(s):  
Fiscal Policy ◽  
Business Cycle ◽  
Current Account ◽  
Current Account Balance ◽  
Currency Board ◽  
Twin Deficits ◽  
State Budget ◽  
Fiscal Balance ◽  
The Business Cycle ◽  
The Current Account

Macroeconomic management of a small open economy in a currency board arrangement faces two serious problems: first, under a fixed exchange rate, fiscal policy is the only effective macroeconomic instrument for smoothing out the business cycle; second, the twin deficits phenomenon, if it exists, may jeopardize the stability of the currency board arrangement. This paper uses quarterly seasonally adjusted Eurostat data for the period of 1999–2019, the Hodrick–Prescott filter and a vector autoregression (VAR) to answer the three questions that are of utmost importance to Bulgarian policy-makers: first, is the discretionary fiscal policy of the Bulgarian government procyclical or countercyclical? Second, do the automatic stabilizers in the Bulgarian state budget function properly? Finally, is the twin deficits hypothesis valid for Bulgaria? Our findings imply that the fiscal discretion of the Bulgarian government is procyclical, while the automatic fiscal stabilizers do not work effectively. The first part of the twin deficits hypothesis (the causal link between the fiscal balance and the current account balance) is confirmed but the second part of the twin deficits hypothesis (the positive relationship between the fiscal balance and the current account balance) is rejected for Bulgaria. It may be inferred that both sides of the Bulgarian state budget (revenue and expenditure) need to be improved in order to increase the effectiveness of Bulgaria’s fiscal policy. Low budget deficits (not higher than 3% of GDP) are recommended for improving the current account balance and encouraging economic growth.

scholarly journals The Influence of Taxes on Inflows and Outflows of Foreign Direct Investment

2020 ◽  
Vol 6 (3) ◽  
pp. 244-255
Author(s):  
I. M. Drapkin ◽  
Keyword(s):  
Fiscal Policy ◽  
Current Account ◽  
Open Economy ◽  
Small Open Economy ◽  
Current Account Balance ◽  
Currency Board ◽  
Twin Deficits ◽  
State Budget ◽  
Fiscal Balance ◽  
The Current Account

Macroeconomic management of a small open economy in a currency board arrangement faces two serious problems: first, under a fixed exchange rate, fiscal policy is the only effective macroeconomic instrument for smoothing out the business cycle; second, the twin deficits phenomenon, if it exists, may jeopardize the stability of the currency board arrangement. This paper uses quarterly seasonally adjusted Eurostat data for the period of 1999–2019, the Hodrick–Prescott filter and a vector autoregression (VAR) to answer the three questions that are of utmost importance to Bulgarian policy-makers: first, is the discretionary fiscal policy of the Bulgarian government procyclical or countercyclical? Second, do the automatic stabilizers in the Bulgarian state budget function properly? Finally, is the twin deficits hypothesis valid for Bulgaria? Our findings imply that the fiscal discretion of the Bulgarian government is procyclical, while the automatic fiscal stabilizers do not work effectively. The first part of the twin deficits hypothesis (the causal link between the fiscal balance and the current account balance) is confirmed but the second part of the twin deficits hypothesis (the positive relationship between the fiscal balance and the current account balance) is rejected for Bulgaria. It may be inferred that both sides of the Bulgarian state budget (revenue and expenditure) need to be improved in order to increase the effectiveness of Bulgaria’s fiscal policy. Low budget deficits (not higher than 3% of GDP) are recommended for improving the current account balance and encouraging economic growth.

IMF Stabilization Programs, Policy Conduct and Macroeconomic Outcomes: A Case Study of Pakistan

2006 ◽  
Vol 11 (1) ◽  
pp. 35-62
Author(s):  
Nawaz A. Hakro ◽  
Wadho Waqar Ahmed
Keyword(s):  
Current Account ◽  
Inflation Rate ◽  
Current Account Balance ◽  
Macroeconomic Policies ◽  
Explanatory Variables ◽  
Fiscal Balance ◽  
Macroeconomic Impacts ◽  
The Individual ◽  
The Imf

This study is designed to assess the macroeconomic performance of fund-supported programs, and the sequencing and ordering of macroeconomic policies in the context of the Pakistan economy. The generalized evaluation estimator technique has been used to assess the macroeconomic impacts of the IMF supported programs. GDP growth, inflation rate, current account balance, fiscal balance and unemployment are used as the target variables in order to gauge economic performance during the program years. The vector of policy variables (that might have been adopted in the absence of programs) and the vector of foreign exogenous variables are also taken as explanatory variables in the model, so that the individual effect of the IMF supported programs could be assessed. The result suggests that as the IMF prescriptions were applied, the current account balance has worsened, the unemployment rate has significantly increased, and the inflation rate has increased during the years of fund-supported programs. Only the budget balance has shown signs of improvement. Furthermore an inadequate sequencing of reforms has contributed to the further worsening of the economic scenario during the program period.

scholarly journals Występowanie deficytów bliźniaczych w wybranych państwach Unii Europejskiej i w Polsce w latach 2009–2018

2021 ◽  
pp. 157-178
Author(s):  
Izabela , Piotr Cirin Zawiślińska ◽  
Piotr Cirin
Keyword(s):  
Current Account ◽  
Debt Crisis ◽  
Balance Of Payments ◽  
Current Account Balance ◽  
Budget Deficits ◽  
Twin Deficits ◽  
State Budget ◽  
Main Research ◽  
Internal Balance ◽  
The Current Account

The aim of the article is to determine the degree, direction and strength of impact of the studied variables, i.e. the state budget balance and the current account balance as part of Poland's balance of payments in the years 2009-2018 against the background of selected European Union (EU) countries. The main research questions focus on determining the type of relationships connecting the studied deficits in the light of previous studies dedicated to the twin deficits hypothesis. The methodology used is based on integrated correlation analysis, linear regression and an analysis of the coefficient of variation. As a result of the study, a strong correlation was found between the cumulative values of the studied deficits, which confirms the existence of the twin deficits hypothesis in Poland in the examined period and means that the budget deficit affects the current account balance. A change in the cumulative balance of the budget by 1% leads to a change in the cumulative balance of the current account of the balance of payments by 0.89%. It can be presumed that the problem of budget deficits and the related debt crisis as well as balance of payments balances under the dichotomy of "surplus north" and "deficit south" in the next decade will be one of the most conflicting and disintegrative for the EU. Thus, the search for a path to budget (internal) balance and balance of payments (external) is one of the key challenges for maintaining cohesion and maintaining sustainable development both in Poland and the entire EU.

scholarly journals Determinants of Current Account Balance in Six ASEAN Countries: A Panel Analysis Approach

2019 ◽  
Vol 11 (7) ◽  
pp. 129
Author(s):  
Soo Xin Lin ◽  
Jerome Kueh
Keyword(s):  
Current Account ◽  
Panel Cointegration ◽  
Current Account Balance ◽  
Vector Error Correction ◽  
Long Run ◽  
Time Period ◽  
Fiscal Balance ◽  
Short Run ◽  
Asean Countries ◽  
Age Dependency Ratio

This paper aims to examine the potential determinants of current account balance, which has been an interesting research topic in analysis over the decade. The relationship between current account balance and several different variables, such as fiscal balance, public debt, real GDP, and age dependency ratio for old and young, are examined. In this paper, the selected time period is from 1990 to 2016, in order to include the financial crisis period in six ASEAN countries (Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam). To this end, the research is based on the estimation of panel unit root, panel cointegration, panel Vector Error-Correction Model (VECM) and panel Granger causality. The findings show that all variables are cointegrated in the long-run and there are also unidirectional and bidirectional causal relationships in the short-run.

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