IMF Working Papers

Does Fiscal Policy Matter for the Trade Account? A Panel Cointegration Study

By Christiane Nickel, Katja Funke

June 1, 2006

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Format: Chicago

Christiane Nickel, and Katja Funke. "Does Fiscal Policy Matter for the Trade Account? A Panel Cointegration Study", IMF Working Papers 2006, 147 (2006), accessed June 12, 2025, https://doi.org/10.5089/9781451864076.001

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Expenditure, Exports, Imports, Private consumption, Private investment

Keywords: Fiscal policy, Government expenditure, WP

Publication Details

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