Fiscal Policy and the Current Account

32 Pages Posted: 19 Jul 2010

See all articles by S. M. Ali Abbas

S. M. Ali Abbas

International Monetary Fund (IMF)

Jacques Bouhga-Hagbe

International Monetary Fund (IMF) - Middle East and Central Asia Department

Antonio Fatás

INSEAD; Centre for Economic Policy Research (CEPR); ABFER

Paolo Mauro

International Monetary Fund (IMF)

Ricardo Velloso

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2010

Abstract

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 auto-regressions, 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.

Keywords: current account, exchange rate, external imbalances, fiscal policy

JEL Classification: C01, C40, E60, E61, E62, E65

Suggested Citation

Abbas, S. M. Ali and Bouhga-Hagbe, Jacques and Fatas, Antonio and Mauro, Paolo and Velloso, Ricardo, Fiscal Policy and the Current Account (June 2010). CEPR Discussion Paper No. DP7859. Available at SSRN: https://ssrn.com/abstract=1640381

S. M. Ali Abbas (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jacques Bouhga-Hagbe

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Antonio Fatas

INSEAD ( email )

1 Ayer Rajah Avenue
Singapore, 138676
Singapore
+6567995384 (Phone)

HOME PAGE: http://faculty.insead.edu/fatas

Centre for Economic Policy Research (CEPR)

London
United Kingdom

ABFER ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Paolo Mauro

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Ricardo Velloso

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
4
Abstract Views
597
PlumX Metrics