Fiscal Policy and the Current Account
May 1, 2010
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Summary
This paper examines the relationship between fiscal policy and the current account, drawing on a larger country sample than in previous studies and using panel regressions, vector autoregressions, and an analysis of large fiscal and external adjustments. On average, a strengthening in the fiscal balance by 1 percentage point of GDP is associated with a current account improvement of 0.2–0.3 percentage point of GDP. This association is as strong in emerging and low-income countries as it is in advanced economies; and significantly higher when output is above potential.
Subject: Current account, Current account balance, Fiscal policy, Fiscal stance, Government consumption
Keywords: GDP, WP
Pages:
30
Volume:
2010
DOI:
Issue:
121
Series:
Working Paper No. 2010/121
Stock No:
WPIEA2010121
ISBN:
9781455200801
ISSN:
1018-5941
