Does Fiscal Policy Matter for the Trade Account? A Panel Cointegration Study
IMF Working Papers, June 1, 2006
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Bibliographic details
- Authors: Christiane Nickel, Katja Funke
- Published: June 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451864076.001
Authors and Publication
- Authors: Christiane Nickel, Katja Funke
- Publication date: June 1, 2006
- Series: Working Paper No. 2006/147
- Issue: 147
- Volume: 2006
- Pages: 27
- DOI: https://doi.org/10.5089/9781451864076.001
- Stock No: WPIEA2006147
- ISBN: 9781451864076
- ISSN: 1018-5941
Research Question and Scope
- Research question: Empirical relationship between fiscal policy and the trade account.
- Sample: annual panel data of the G-7 countries for the years 1970 through 2002.
- Key subject tags: Expenditure, Exports, Imports, Private consumption, Private investment.
- Keywords: fiscal policy, government expenditure, WP.
Methodology
- Estimation technique: pooled mean group estimation.
- Distinct modeling choice: explicitly accounts for different elasticities of the components of private and public demand in the import demand equation.
Core Findings
- The composition of overall demand—that is, the distribution among public demand, private demand, and export demand—has an impact on the magnitude of the trade account deficit.
- Empirical evidence is provided using the described pooled mean group estimation on the G-7 panel covering 1970 through 2002.
Implications
- Fiscal policy matters for the trade account not only through aggregate demand levels but also through the composition of demand between public and private components and exports.
- Policy analysis of trade deficits should consider differential import elasticities across demand components when assessing fiscal policy effects.
Source: IMF Working Paper — "Does Fiscal Policy Matter for the Trade Account? A Panel Cointegration Study" (Nickel and Funke, June 1, 2006).