Interactions between the budget and the current account balance: twin deficits in selected Central and East European countries
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Opublikowane:
sty 19, 2020
Słowa kluczowe:
twin deficit, budget balance, current account balance
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Abstrakt
Nowadays, especially after the global financial crisis of 2008, the external and internal balance of individual countries has become a major area of research. This is even more important in the CEE region, as the crisis has shown that imbalances in this region have significantly increased their sen- sitivity to the crisis. In our research, we aim to explore whether there is, if any, relationship between fiscal policy and the balance of the current account in Poland, Hungary and the Czech Republic. The period which we will analyse is the last two decades since the millennium. Based on a literature review, we examine the relationship between the budget deficit and the current account with econo- metric methods, Engle-Granger cointegration test and Vector Error Correction Model (VECM). Our results will show that we can find different, if any, relationship between the two factors in the different countries. It means, however, that there are a lot of similarities between these countries, from this point of view they are quite heterogeneous. Thus, in this field, there is not one general solution for every country; each country has to find their way to handle the twin deficit problem.
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Matę, A. . (2020). Interactions between the budget and the current account balance: twin deficits in selected Central and East European countries. Journal of Management and Financial Sciences, (38), 47–60. https://doi.org/10.33119/JMFS.2019.38.4
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Bibliografia
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2. Akbostanci, E., Tunc, G.I. (2002). Turkish twin deficits: An error correction model of trade balance. ERC Working Papers in Economics, No. 01/06.
3. Baharumshah, A.Z., Lau, E., Khalid, A.M. (2006). T.esting Twin Deficits Hypothesis Using VARs and Variance Decomposition. Journal of the Asia Pacific Economy, No. 11(3), pp. 331-654. Retrieved from: https://doi.org/10.1080/13547860600764245
4. Barro, R.J. (1989). The Ricardian approach to budget deficits. The Journal of Economic Perspec- tives, No. 3(2), pp. 37-54. Retrieved from: https://doi.org/10.1257/jep.3.2.37
5. Bernheim, B.D. (1988). Budget deficits and the balance of trade. Tax Policy and the Economy, No. 2, pp. 1-31. Retrieved from: https://doi.org/10.1086/tpe.2.20061771
6. Darrat, A.F. (1988). Have large budget deficits caused rising trade deficits? Southern Economic Journal, No. 54(4), pp. 879-887. Retrieved from: https://doi.org/10.2307/1059523
7. Engle, R.E., Granger, C.W.J. (1987). Co-integration and error correction: Representation, estimation and testing. Econometrica, No. 55(2), pp. 251-276. Retrieved from: https://doi. org/10.2307/1913236
8. Fleming, J.M. (1962). Domestic financial policies under fixed and floating exchange rates. IMF Staff Papers, No. 9, pp. 369-379.
9. Islam, M.F. (1998). Brazil's Twin Deficits: An Empirical Examination. Atlantic Economic Journal, No. 26(2), pp. 121-128. Retrieved from: https://doi.org/10.1007/bf02299354
10. Khalid, A.M., Guan, T.W. (1999). Causality tests of budget and current account deficits: Cross- country comparisons. Empirical Economics, No. 24(3), pp. 389-402. Retrieved from: https:// doi.org/10.1007/s001810050062
11. Kim, C.H., Kim, D. (2006). Does Korea have twin deficits? Applied Economics Letters, No. 13 (10), pp. 675-680. Retrieved from: https://doi.org/10.1080/13504850500404910
12. Kim, S., Roubini, N. (2008). Twin deficit or twin divergence? Fiscal policy, current account, and real exchange rate in the U.S. Journal of International Economics, No. 74(2), pp. 362-383. Retrieved from: https://doi.org/10.1016/j.jinteco.2007.05.012
13. Kirchgassner, G., Wolters, J., Hassler, U. (2013). Introduction to Modern Time Series Analyses. Berlin: Springer. Retrieved from: https://doi.org/10.1007/978-3-642-33436-8
14. Kiss, G.D. (2017). Volatilitas, extrem elmozdulasok es tokepiacifertozesek. Szeged: JATEPress Kiadó.
15. Lutkepohl, H. (2005). New Introduction to Multiple Time Series Analysis. Berlin: Springer. Retrieved from: https://doi.org/10.1007/3-540-27752-8
16. Leachman, L.L., Francis, B. (2002). Twin deficits: apparition or reality? Applied Economics Letters, No. 34(9), pp. 1121-1132. Retrieved from: https://doi.org/10.1080/00036840110069976
17. Magazzino, C. (2012) The twin deficits phenomenon: evidence from Italy. Journal of Economic Cooperation and Development, No. 33(3), pp. 65-80.
18. Marashdeh, H., Saleh, A.S. (2006). Revisiting Budget and Trade Deficits in Lebanon: A Critique. University of Wollongong, Faculty of Commerce - Economics Working Papers, 06-07.
19. Mukhtar, T., Zakaria, M., Ahmed, M. (2007). An Empirical Investigation for the Twin Deficit Hypothesis in Pakistan. Journal of Economic Cooperation and Development, No. 28(4), pp. 63-80.
20. Mundell, R.A. (1963). Capital mobility and stabilization policy under fixed and flexible exchange rates. Canadian Journal of Economic and Political Science, No. 29(4), pp. 475-485. Retrieved from: https://doi.org/10.2307/139336
21. Ratha, A. (2012). Twin Deficits or Distant Cousins? Evidence from India. South Asia Economic Journal, No. 13(1), pp. 51-68. Retrieved from: https://doi.org/10.1177/139156141101300103
22. Salvatore, D. (2006). Twin deficits in the G-7 countries and global structural imbalances. Journal of Policy Modeling, No. 28(6), pp. 701-712. Retrieved from: https://doi.org/10.1016/j.jpolmod.2006.06.003
23. Sen, H., Kaya, A. (2016). Are the twin or triple deficits hypotheses applicable to post-communist countries? Bank of Finland, BOFIT Discussion Papers, No. 3.
24. Summers, L. (1986). Debt problems and macroeconomic policies. Harvard Institute of Economic Research Discussion Paper No. 1272. Cambridge: Harvard University.
25. Trachanas, E., Katrakilidis, C. (2013). The dynamic linkages of fiscal and current account deficits: New evidence from five highly indebted European countries accounting for regime shifts and asymmetries. Economic Modelling, No. 31, pp. 502-510. Retrieved from: https:// doi.org/10.1016/j.econmod.2012.12.026
26. Vamvoukas, G.A. (1999). The twin deficits phenomenon: evidence from Greece. Applied Eco- nomics, No. 31(9), pp. 1093-1100. Retrieved from: https://doi.org/10.1080/000368499323571
2. Akbostanci, E., Tunc, G.I. (2002). Turkish twin deficits: An error correction model of trade balance. ERC Working Papers in Economics, No. 01/06.
3. Baharumshah, A.Z., Lau, E., Khalid, A.M. (2006). T.esting Twin Deficits Hypothesis Using VARs and Variance Decomposition. Journal of the Asia Pacific Economy, No. 11(3), pp. 331-654. Retrieved from: https://doi.org/10.1080/13547860600764245
4. Barro, R.J. (1989). The Ricardian approach to budget deficits. The Journal of Economic Perspec- tives, No. 3(2), pp. 37-54. Retrieved from: https://doi.org/10.1257/jep.3.2.37
5. Bernheim, B.D. (1988). Budget deficits and the balance of trade. Tax Policy and the Economy, No. 2, pp. 1-31. Retrieved from: https://doi.org/10.1086/tpe.2.20061771
6. Darrat, A.F. (1988). Have large budget deficits caused rising trade deficits? Southern Economic Journal, No. 54(4), pp. 879-887. Retrieved from: https://doi.org/10.2307/1059523
7. Engle, R.E., Granger, C.W.J. (1987). Co-integration and error correction: Representation, estimation and testing. Econometrica, No. 55(2), pp. 251-276. Retrieved from: https://doi. org/10.2307/1913236
8. Fleming, J.M. (1962). Domestic financial policies under fixed and floating exchange rates. IMF Staff Papers, No. 9, pp. 369-379.
9. Islam, M.F. (1998). Brazil's Twin Deficits: An Empirical Examination. Atlantic Economic Journal, No. 26(2), pp. 121-128. Retrieved from: https://doi.org/10.1007/bf02299354
10. Khalid, A.M., Guan, T.W. (1999). Causality tests of budget and current account deficits: Cross- country comparisons. Empirical Economics, No. 24(3), pp. 389-402. Retrieved from: https:// doi.org/10.1007/s001810050062
11. Kim, C.H., Kim, D. (2006). Does Korea have twin deficits? Applied Economics Letters, No. 13 (10), pp. 675-680. Retrieved from: https://doi.org/10.1080/13504850500404910
12. Kim, S., Roubini, N. (2008). Twin deficit or twin divergence? Fiscal policy, current account, and real exchange rate in the U.S. Journal of International Economics, No. 74(2), pp. 362-383. Retrieved from: https://doi.org/10.1016/j.jinteco.2007.05.012
13. Kirchgassner, G., Wolters, J., Hassler, U. (2013). Introduction to Modern Time Series Analyses. Berlin: Springer. Retrieved from: https://doi.org/10.1007/978-3-642-33436-8
14. Kiss, G.D. (2017). Volatilitas, extrem elmozdulasok es tokepiacifertozesek. Szeged: JATEPress Kiadó.
15. Lutkepohl, H. (2005). New Introduction to Multiple Time Series Analysis. Berlin: Springer. Retrieved from: https://doi.org/10.1007/3-540-27752-8
16. Leachman, L.L., Francis, B. (2002). Twin deficits: apparition or reality? Applied Economics Letters, No. 34(9), pp. 1121-1132. Retrieved from: https://doi.org/10.1080/00036840110069976
17. Magazzino, C. (2012) The twin deficits phenomenon: evidence from Italy. Journal of Economic Cooperation and Development, No. 33(3), pp. 65-80.
18. Marashdeh, H., Saleh, A.S. (2006). Revisiting Budget and Trade Deficits in Lebanon: A Critique. University of Wollongong, Faculty of Commerce - Economics Working Papers, 06-07.
19. Mukhtar, T., Zakaria, M., Ahmed, M. (2007). An Empirical Investigation for the Twin Deficit Hypothesis in Pakistan. Journal of Economic Cooperation and Development, No. 28(4), pp. 63-80.
20. Mundell, R.A. (1963). Capital mobility and stabilization policy under fixed and flexible exchange rates. Canadian Journal of Economic and Political Science, No. 29(4), pp. 475-485. Retrieved from: https://doi.org/10.2307/139336
21. Ratha, A. (2012). Twin Deficits or Distant Cousins? Evidence from India. South Asia Economic Journal, No. 13(1), pp. 51-68. Retrieved from: https://doi.org/10.1177/139156141101300103
22. Salvatore, D. (2006). Twin deficits in the G-7 countries and global structural imbalances. Journal of Policy Modeling, No. 28(6), pp. 701-712. Retrieved from: https://doi.org/10.1016/j.jpolmod.2006.06.003
23. Sen, H., Kaya, A. (2016). Are the twin or triple deficits hypotheses applicable to post-communist countries? Bank of Finland, BOFIT Discussion Papers, No. 3.
24. Summers, L. (1986). Debt problems and macroeconomic policies. Harvard Institute of Economic Research Discussion Paper No. 1272. Cambridge: Harvard University.
25. Trachanas, E., Katrakilidis, C. (2013). The dynamic linkages of fiscal and current account deficits: New evidence from five highly indebted European countries accounting for regime shifts and asymmetries. Economic Modelling, No. 31, pp. 502-510. Retrieved from: https:// doi.org/10.1016/j.econmod.2012.12.026
26. Vamvoukas, G.A. (1999). The twin deficits phenomenon: evidence from Greece. Applied Eco- nomics, No. 31(9), pp. 1093-1100. Retrieved from: https://doi.org/10.1080/000368499323571