Dissertations / Theses on the topic 'Twin deficits in Nepal'

This study investigates the validity of the twin deficits hypothesis for the Turkish quarterly data over the 1988:1-2005:2 periods. To this end, we consider a VAR variable space containing budget deficits, current account deficits, real output, real interest rates and real exchange rates and employ cointegration, equilibrium/error correction mechanism techniques along with Granger-non-causality tests and impulse response analyses. The empirical results from decompositions of the budget and current account deficits into their cyclical and structural components suggest that both CAD and BD are counter-cyclical. The twin deficit hypothesis, consistent with the conventional Mundell-Flemming framework, postulates that current account and budget deficits move together in the long run and the causality runs from the former to the latter. The results from Engle-Granger and Johansen cointegration procedures support either the twin divergence or the Ricardian equivalence postulations but not the twin deficits hypothesis. Current account deficits and budget deficits are also found to be jointly endogenous. The short-run impacts of budget deficits on current account deficits are found to be mainly through the real exchange rate and real interest rate channels.

This thesis examines the effects of budget deficits on the current account imbalance and inflation in African countries. The aims of this thesis are; first, to use higher frequency data. Most studies in African countries use annual data; by contrast we use quarterly data. Second, to examine the dynamic interaction between fiscal deficits and current account imbalances using VAR models. Third, to explore the long-run relationship between the twin deficits, using the autoregressive distributed lag (ARDL) of Pesaran, Shin and Smith (2001). Fourth, to assess the long-run relationship between the twin deficits using the threshold autoregressive models of Hansen and Seo (2002). Fifth, to model inflation as being non-linearly related to fiscal deficits using the asymmetric cointegration approach of Enders and Siklos (2001). The second chapter discusses the theoretical framework and review of the empirical literature on twin deficits and fiscal deficits and inflation. We find much evidence in support of the twin deficits hypothesis that increase in government deficits leads to increase in the current account deficits. There is little empirical study on the Ricardian equivalence hypothesis. From the twin deficits literature, we observe that where the twin deficits hypothesis holds there is a high degree of openness and also countries operates a flexible exchange rate. The empirical literature on fiscal deficits and inflation suggests that fiscal deficits are inflationary in high inflation economies and developing countries, but not in low inflation and developed countries. The third chapter examines the time series properties of the series using the Augmented Dickey-Fuller test, the Phillip-Perron test and the Lee and Strazicich (2003) two-break unit root test. Results for the unit root test reveals that majority of the series are significant in their first differences. By contrast applying the LM two structural break test shows that the majority of the series are significant around two structural breaks. The fourth chapter analyses the twin deficits hypothesis using a VAR model. Results show that a positive government deficit shock increases the current account deficit in Botswana, Egypt, Ethiopia, Ghana, Morocco, South Africa and Tanzania while the current account improves in response to a positive government deficit shock in Cameroon and Uganda. Also in response to a positive government deficit shock, the current account remains constant in Kenya, Nigeria and Tunisia. The fifth chapter examine the long run relationship between the twin deficits hypothesis accounting for structural breaks using the Autoregressive Distributed Lags (ARDL) model. Results show that the fiscal deficit in the twelve African countries has long run impact on the current account deficit. The sixth chapter examines the relationship between fiscal deficit and current account deficit using the bi-variate threshold cointegration model of Hansen and Seo (2002) for nine countries where the fiscal deficits and current account deficits were significant at first differences. We find evidence of a positive cointegrating relationship between the current account and the fiscal balances for Botswana, Cameroon, Egypt, Morocco, Nigeria and Tanzania; and a negative cointegrating relationship in Ethiopia, Kenya and Uganda. The seventh chapter examines the long-run relationship between fiscal deficits and inflation in eleven African countries using the TAR and M-TAR models of Enders and Siklos (2001). Results show that fiscal deficits and inflation are asymmetry in Botswana, Egypt, Ethiopia, Ghana, Kenya, Morocco and Tanzania. This thesis centres on the twin deficits and fiscal deficits and inflation in African countries. Conclusions from the empirical chapters indicate that large fiscal deficits is the cause of current account deficits, and that fiscal deficits are inflationary. This study further suggests that African countries should spend their resources on projects that will accelerate the level of growth and development.

This paper investigates the relationship between countries' fiscal balances and current accounts with an emphasis on the role of fiscal rules. The direct effect of fiscal policy on the current account via aggregate (import) demand is potentially amplified by indirect effects, materializing through interest rate effects and inter-generational transfers that reduce savings. On the other hand, the implied positive relation between fiscal and external balances is potentially attenuated by offsetting changes in savings through Ricardian equivalence considerations. We expect this attenuation effect to be stronger in countries with more stringent fiscal rules and test this hypothesis using a panel of 73 countries over the period 1985-2012. As previous studies we find a positive effect of fiscal balances on the current account, supporting the twin deficit hypothesis. However, the effect of fiscal balances on the current account depends on the stringency of fiscal (budget balance or debt) rules in place; it is reduced by one third on average and virtually eliminated for countries with the most stringent fiscal rules. (authors' abstract)
Series: Department of Economics Working Paper Series

This paper investigates the relationship between countries' fiscal balances and current accounts with an emphasis on the role of fiscal rules. The direct effect of fiscal policy on the current account via aggregate (import) demand is potentially amplified by indirect effects, materialising through interest rate effects and intergenerational transfers that reduce savings. On the other hand, the implied positive relation between fiscal and external balances is potentially attenuated by offsetting changes in savings through Ricardian equivalence considerations. We expect this attenuation effect to be stronger in countries with more stringent fiscal rules and test this hypothesis using a panel of 73 countries over the period 1985-2012. As with previous studies, we find a positive effect of fiscal balances on the current account, supporting the twin deficit hypothesis. However, the effect of fiscal balances on the current account depends on the stringency of fiscal (budget balance or debt) rules in place; it is reduced by one-third on average and virtually eliminated for countries with the most stringent fiscal rules.

Globalization and international dynamics have always been crucial to understand modern economic development. Balance of payments dynamics, budget deficit, cur- rent account and international trade are the common subjects analyzed in order to deepen the issue from a macroeconomic perspective. The three chapters of the thesis cover exactly these topics. The first chapter provides new and robust estimates of the Italian current account between 1861 and 1914 overcoming the lacking data context showed by previous studies. In particular, focus is on the main entries of the invis- ible trade balance, that are: remittances, tourism, freights and capital interests. The second chapter shed lights on the relationship between budget deficit and current account deficit testing the so-called “twin deficit hypothesis” and exploiting part of the series of the first chapter together with other dataset. The econometric analysis is applied to both the short-run and the long-run. The third paper deepen the role of freights within the Italian international trade by looking to a new unit transport cost series presented for the first time in this kind of literature. The analysis is extended also to some specific determinants of trade such as bulkiness and distance.

This thesis addresses issues of debt and the twin deficits - two serious ‘economic ills’. The central issue in this thesis (Part II) is on macromodelling of the twin deficits in an attempt to identify their determinants. This involves an investigation of the underlying theory and empirical evidence to show the workings of the links between debt and the twin deficits and between the twin deficits themselves. The usual practice in both theory and in empirical work, is to take the accounting identity and one or two other variables that are hypothesised to have effects on the twin deficits and posit causal linkages. We try to avoid this by building on the stylized facts on each of the macroeconomic aggregates and linking them to debt issues in building a full structural model of debt and the twin deficits. We arrive at a system of simultaneous equations, which none of the previous theory or empirical work has derived. We rename the deficit system of simultaneous equations which incorporates a debt identity and an output equation the `new twin deficits' model – signifying a departure from the conventional wisdom discussed in the literature survey. With the macromodel, we address three issues simultaneously, which are: (1) the linkages between twin deficits and increased indebtedness. (2) the details of internal policies that have effects on the twin-deficits and increased indebtedness. (3) the linkages between debt, twin-deficits and output. The first issue involves the broader mechanism that explains the link between the government, the private and the external sector balances, and their links to changes in debt. Previous studies on the twin deficits covers the first part of this issue and gives evidence for the U. S. that the government sector caused the unprecedented level of external deficits in the mid 1980s and early 1990s. In our case, we argue that the change in debt equals the external deficits because according to our findings in Part I debt and deficits seem to co-move. Our macromodel also focus on the second issue, that is, the details of the internal policies that affect each of the three sector deficits and eventually increased indebtedness. The variables involved are numerous such as tax policies (rates, revenue elasticities, etc. ), financial policies (interest rates, investment versus savings behaviour, etc. ), trade policies (import liberalisation/control, exports strategies, exchange rates, prices, etc. ), debt policies, etc. as shown in the system of simultaneous equations in Chapter 5. Although the variables are numerous, there are some common ones appearing together in either two or all three of the system of equations which are expected to cause co-movements in the system. Obviously, consideration has to be made on their significance, magnitude and signs. The third issue involves recognising the supply side in response to debt and deficits which are demand-side management. The model thus ensures not only equilibrium in the internal and external sectors but also equilibrium in aggregate supply and the aggregate demand. The former equilibrium always holds because the identity serves as a constraint. For the latter equilibrium to hold, either one or a combination of the price variables found in the system adjust to maintain equilibrium in the short-run, while output adjusts to maintain equilibrium in the long-run. Having outlined the core of the thesis, it is appropriate to comment on the other parts. Part I presents the roots of debt and deficits; how developing countries accumulated debt and how it became a crisis in the 1980s. The debt and deficits situation in ASEAN in the 1980s is a particular focus. The essence of debt problem seems to be the adverse economic situation of the 1980s, against the background of mounting accumulation of debt. Exogenous shocks such as the second oil shock, terms of trade shocks, interest rates hikes, dollar exchange rate appreciation, are among the factors that are associated with debt problems. Debt and deficits co-move in the representative Latin American and ASEAN countries. Differences among regional experiences are highlighted. For example the African countries went into debt problem not because of debt accumulation. The main crux of their problem is non-performance export sector. Excessive lending by creditors are associated with the Latin American countries, apart from loans contracted on floating rates which are associated with valuation changes and capital flight. The ASEAN region moved towards yen credit in the mid 1980s, presumably insulating their economy with further spill-overs from other NICs' recycling of surpluses. The differences in experiences necessitates different treatment, or case by case approach to debt problems. In Part III, we present some empirical work on aspects of debt management. Debt servicing capacity or creditworthiness is examined using the logit approach. We builtin the marginal and elasticity analysis into the logit model so as to identify which variables are the most significant determinants. The exercise combines variables taken from the balance of payments and financial variables from the balance sheet to detect which variables cause debt servicing breakdown. The breakdown of debt servicing capacity is proxied by reschedulings, taken in terms of probabilities because it is not known a priori that a debtor will become illiquid and unable to repay interest payments falling due. We postulate that it is the foreign exchange scarcity, measured by their net borrowing requirements which comprise of the current account deficits including interest repayments and the principal due, that drive a country to demand for rescheduling. We investigate the determinants of rescheduling for each region separately to capture the differences in their experiences with indebtedness. The most important determinants of rescheduling are; the ratio of the current account deficits to export, the reserves to import ratio and the total debt to exports. In the African sample, the current account deficits to exports, the total debt to exports and the use of IMF credits are the most important determinants for rescheduling. As in the case of the Latin American countries, The current account deficits to exports, the debt service ratio and the use of IMF credit are most important. In ASEAN, the debt service ratio appears to be the single most significant ratio. Thus, the differences in experiences among regions, a cross section for all developing countries will ignore the uniqueness of each region in running into debt servicing difficulties. In the last part of the thesis, the exchange rate management is discussed in Chapter 7, relating exchange rate to import and export demand function to eventually determine the contribution of foreign exchange, through the elasticity approach, towards foreign exchange earnings and reducing debt service. Debt service seems to have links with exchange rates movements. We suggest that devaluation does have positive effects in the ASEAN countries to increase its foreign exchange earnings. Finally, we conclude and suggest some policy implications, especially pertaining to our twin deficit model. It is hoped that ASEAN would turn the already huge debt accumulation to more profitable investments so that not only timely repayment of loans is possible, the growth of output is ensured and the sustained industrialisation is possible!

 

Over the last decade, the world economy has been characterized by an alarming escalation of global current account imbalances. The United States and many of other high-income countries have been running huge current account deficits; according to basic accounting principles, these deficits have to be counterbalanced by increasing current account surpluses in other parts of the world.  The latter (current account surpluses) are mainly incurred by newly industrialized economies in the East Pacific and rapidly developing oil exporters.

The paper investigates the medium-term determinants of the current account based on the sample of 24 countries over the period of 1990-2004. The choice of explanatory variables for the analysis is backed up by the two theories of current account imbalances, namely, the "savings glut" and the "twin deficits "arguments. The results of the regression model show that both above-mentioned theories can be credited for the emergence of global current account imbalances. Moreover, our findings suggest some remedial measures to improve the situation based on the mix of policy tools from both "savings glut" and "twin deficit" perspectives.

The aim of this master thesis is to empirically validate "hypothesis of twin deficits", resulting from Mundell-Fleming model, in the Czech Republic in years 1999-2010. The econometric method used was VAR models and Impulse Response Functions based on these models. Analysis proved that as a result of government deficit increase, through exchange rate appreciation, the balance of foreign trade deteriorates. Another fact discovered is that people are partially behaving as described by Ricardo-Barro equivalence. Their reaction on increased government deficit is increase of their personal savings as well as consumption. But increase of personal savings is not sufficiently compensating the deficit in government budget. Similar results were achieved also in analysis of government spendings.

The theme of this dissertation is Ricardian equivalence, and its objective is to examine the effects of government debt on private consumption expenditures (Essay One), on interest rates (Essay Two), on the current account balance (Essay Three), and on individual intertemporal decision-making (Essay Four). The effects of government debt are important if debt is neutral (e.g., if “Ricardian equivalence” holds), then a stabilization program that is based on demand management policy to curtail fiscal deficits will not be operative. On the other hand, if debt is not neutral (or if Ricardian equivalence does not hold), then deficit finance may induce private consumption, boost interest rates, crowd out investment, and retard economic growth. Essay One contributes to the existing literature by taking into account the nature of liquidity constraints in a developing economy in an aggregate consumption function. Previous empirical tests on Ricardian equivalence have not considered the role of a dominant resource aspect of a country. Essay Two and Essay Three incorporate a dominant resource aspect in Indonesia by estimating the oil-macroeconomic relationship. Furthermore, Essay Three takes into account the role of capital inflows by including debt securities. Essay Four uses experimental economics methods to examine the role of distortionary taxes on Ricardian equivalence. There have been only a few studies that use an experimental approach to examine the effect of deficit spending on consumption expenditures, but these existing experimental studies ignore the role of distortionary taxes in affecting subjects’ consumption-saving decisions and focus on the presence of liquidity constraints, myopia, and uncertainty on future income. Essay Four contributes to the Ricardian equivalence literature by taking into account distortionary taxes in a Ricardian institution by levying taxes on savings in an intertemporal individual consumption-savings decision in laboratory experiments. By utilizing the aggregate consumption function and the Euler equation consumption function, Essay One shows that Indonesian consumers tend to behave in a non-Ricardian way. Public debt most likely will lead to crowding out of investment, and will retard capital accumulation and economic growth. The extent to which individuals perceive government expenditures as complements for their consumption is substantial. An increase in government expenditures will increase the marginal utility of private consumption and has an expansionary effect on aggregate demand. The complementarity between private consumption and government expenditures may be partly due to the allocation of government subsidies to basic goods and services such as electricity, fuel, fertilizer, health centers, and education. Liquidity constraints may cause consumption to have an excess sensitivity to income. The short-run and long-run aggregate consumption function estimates show that income affects consumption, indicating that consumers follow a “rule of thumb” of consuming their current income. A high ratio of public debt to gross domestic product (GDP) in Indonesia may also be the culprit of the excess sensitivity of private consumption to income. Due to low salaries in the formal sector, employees have been engaged in moonlighting activities, mostly in the form of self-employment (e.g., opening retail stores or services). This phenomenon may help to explain why private credit−which amounts to 29 percent of GDP−fails to explain consumption behavior. Most loans are made for investment rather than for consumption. Consumers’ behavior is insensitive to taxation, which perhaps is due to the fact that tax enactment is not explicitly revealed in Indonesia (e.g., price tags in the supermarket include the sales tax, and employees are only informed about their after-tax net wage instead of their gross wage). The share of tax collections to GDP averages only about 15 percent. There is still a large portion of the population who do not pay taxes or who pay far below what they should pay. The fiscal authority needs to focus more attention on alternative financing, i.e. taxation, whose system is essential to be enhanced. Essay Two shows that by excluding oil prices, deficits and debt significantly increase the real interest rate, thereby invalidating Ricardian equivalence. The evidence shows some preference for debt and deficit over government expenditures as determinants of interest rates. Inclusion of the oil price weakens the Neoclassical results, providing more support for the Ricardian paradigm. Deficits no longer increase interest rates, yet debt still significantly increases interest rates. This result reflects a loss of momentum for the Indonesian government two decades ago to decrease its dependency on debt. The government could have used the windfall oil revenue to pay off foreign debt; instead, the windfall was spent on import-intensive infrastructure development projects, in order to build domestic industry and to subsidize rice and petroleum products. The importance of oil prices in the interest rate estimation suggests that in modeling the Indonesian macroeconomy, the oil sector should be incorporated. The non-stationary nature of the stock of debt implies the failure of intertemporal budget balance to hold, indicating that the debt-financed deficit is unsustainable. Essay Three shows that around 80 percent of the estimation results provide support for the Neoclassical view, a result that is consistent with the twin deficits hypothesis. The long-run estimates indicate an almost one-to-one relationship between the government budget and the trade balance, while the short-run estimates show a smaller magnitude. When capital inflows are included, the twin deficits phenomenon is less pronounced in the short-run and disappears in the long-run. An increase in the oil price statistically and significantly improves the trade balance in the short-run and in the long-run. Essay Four shows that subjects fully anticipate an increase in future taxation by increasing the amount bequeathed in one-to-one correspondence to the increase in debt. Even under a Ricardian institution, the distorting nature of taxes on savings alters subjects’ consumption-savings decisions. The equality of the change in bequests and the change in deficit spending is not attained under the savings taxes treatment, invalidating Ricardian equivalence. In line with the results of Essays One, Two, and Three, which suggest the vital need to enhance the taxation system, the results of Essay Four entail the importance of taxes on interest income in Indonesia.

The aim of this thesis is to analyze causes of United States budget deficits growth. In the first part, the thesis deals with the theory of public finance and fiscal policy including state budget and its balance. The thesis then focuses on the specific situation in the United Sates, its historical development of fiscal policies, development of federal debt, United States federal budget process, and also list of current main issues that represents main cause behind larger United States budget deficits. At the end, based on Congressional Budget Office data, is the indication of further development of federal debt including discussion over sustainability of the current development. In conclusion, the thesis also tries to find out whether the twin deficits hypothesis is valid for United States based on econometric analysis.

La thèse se concentre sur la problématique très actuelle des déséquilibres macroéconomiques à laquelle on rattache l'existence des déficits jumeaux. La méthode innovante basée sur la métrique des distances, inspirée par la théorie des espaces métriques, permet de mettre en évidence les sources des divergences macroéconomiques qui sont, dans notre cas d'étude, la balance courante et l'endettement. Ces facteurs sont à la source de la divergence macroéconomique dans le monde ainsi qu'en Europe, ce qui souligne l'importance de l'analyse des déficits jumeaux. L'analyse dite de « text-mining », l'analyse du contenu des articles scientifiques sur les déficits jumeaux et leur classement révèlent la prédominance dans la recherche actuelle de l'approche théorique du modèle de Mundell-Fleming et de l'équivalence Ricardienne, qui sont confirmées notamment dans les pays développés. La validité de l'hypothèse des déficits jumeaux pour 14 pays de l'UE-15 dans le contexte de l'endettement public important est testée par l'estimation du modèle à effet de seuil des données de panel. Le modèle permet de conclure que l'hypothèse des déficits jumeaux est confirmée uniquement lorsque la dette publique se trouve dans l'intervalle de 40.2% à 96.6% du PIB. L'équivalence Ricardienne est valide dans le régime de la dette publique supérieure à 96.6% (le modèle à effet de seuil) ou bien 93% (le modèle dynamique qui explique l'impact asymétrique de la dette publique sur la croissance économique) du PIB. Ici, un déficit ne provoque pas l'autre; toutefois, l'efficacité de la politique budgétaire expansionniste pour rétablir la croissance économique est limitée
The thesis presents highly topical macroeconomic imbalances problem and the related twin deficit phenomenon. Innovative distance-based methodology inspired by an algebraic term of the metric space allows to identify sources of the macroeconomic divergence, which are, in our case, the current account and the indebtedness. These factors are responsible for macroeconomic divergence in the world as well as in Europe, which suggests an importance of the twin deficit analysis. Text-mining, analysis of the content and systematic classification of the scientific papers on twin deficits reveal a dominance of the Mundell-Fleming approach and the Ricardian equivalence, confirmed mainly in developed countries. Twin deficit hypothesis in 14 countries of the EU15 in the context of the important public debt is tested by panel data threshold model. The model confirms twin deficit hypothesis only if a public debt-to-GDP ratio is of the range from 40.2% to 96.6%. The Ricardian equivalence is valid in the regime of the public debt-to-GDP higher than 96.6% (threshold model) or 93% (dynamic model explaining an asymmetric impact of the public debt on economic growth). One deficit does not deepen the second one, but efficiency of the expansionary fiscal policy to reestablish an economic growth is importantly reduced at this indebtedness level

L’objectif sous-jacent aux trois chapitres qui composent cette thèse, est une meilleure compréhension de l’incidence des politiques publiques dont les impacts diffèrent entre secteurs hétérogènes. Nous déclinons cette analyse à trois types de politiques publiques au cœur de la macro-économie contemporaine : (i) une politique environnementale (ii) une politique d’aide au développement et (iii) une politique de déficits jumeaux. A travers ces trois chapitres, nous soutenons que les impacts sectoriels des politiques jouent un rôle crucial dans l’évaluation des politiques et dans la détermination de la politique optimale. Le premier chapitre se concentre sur la taxe sur la pollution. Il fournit un modèle théorique qui explique pourquoi il existe une relation négative entre le revenu des ménages et leur soutien pour la taxe sur la pollution. Dans le deuxième chapitre, j’étudie les impacts macroéconomiques d’une politique d’aide au développement et je considère deux secteurs: secteur des biens échangeables (T-secteur) et le secteur des biens non-échangeables (N-secteur). Je considère deux types d’aide étrangère: (i) une aide distribuée par des transferts forfaitaires aux ménages et (ii) une aide destinée à financer les investissements publics. J'étudie l'impact de la libéralisation du marché des capitaux sur la forme optimale et la performance de l'aide au développement. Le troisième chapitre est centré sur les déficits jumeaux : un déficit de la balance courante induit par un déficit de l'équilibre budgétaire. L'analyse économétrique du papier montre que les pays ayant adopté une négociation salariée centralisée présentent des déficits jumeaux plus faibles que les autres. Ce chapitre fournit aussi un modèle théorique pour expliquer ces résultats empiriques
In this dissertation, I study the implications of policies with heterogeneous sectoral impacts in three separate research fields of macroeconomics: (i) environmental policy, (ii) foreign aid and (iii) the political economy of the twin deficits. Through the three chapters of this thesis, it is argued that, in all these three contexts, the sectoral impacts of policies play important roles in the policy evaluation and in the determination of optimal policy. In the first chapter, the policy of concern is the pollution tax. The paper provides a theoretical model to explain why in top income percentiles, there can be a negative relationship between household's income and their support for pollution tax. In the second chapter, I study the macroeconomic impacts of foreign aid and I consider two sectors: tradable sector (T-sector) and non-tradable sector (N-sector). I consider two forms of foreign aid: (i) aid which is transferred to the households and (ii) aid which is used to finance public investment. I investigate the impact of the liberalization of capital market on the optimal form and on the performance of foreign aid. In the third chapter, I consider the same sectors as in the second chapter : T-sector and N-sector. The focus of this chapter is rather on the political economy of the twin deficits: a deficit in current account induced by a deficit in fiscal balance. Econometric analysis of the paper finds evidence that wage centralization, in a cross-section of industrialized economies, is significantly associated with lower deficits in current account and budget balance. The paper provides a political economy framework to explain this empirical finding

碩士
國立暨南國際大學
經濟學系
97
Utilizing the simpler Granger non-causality procedure developed by Toda and Yamamoto (1995), this paper attempts to investigate the causality relationship between the budget deficit and the current account deficit for five regional economies. In order to circumvent the distortion of the causality inferences which could be due to omission of relevant variables, this study conducts the modified Wald test procedure in a multi-variate framework, apart from previous researches in a bi-variate model. The empirical results not only provide some alternative views of conventionally theoretical prediction, but also show the structural imbalances of the each regional economies studied.

碩士
淡江大學
美國研究所
85
1980年代經濟學家的看法認為聯邦預算赤字的持續存在以及擴張，乃 是造成美國對外貿易逆差的主因。由於聯邦擴張性財政政策促使國內利率 水準上揚，因而使得美元匯價大舉上揚，美元升值的結果導致出口貿易迅 速下跌，對外的貿易逆差因而產生。1980年代傳統看法的論點在孟岱爾- 費利明的IS-LM模式解釋下，可以得到合理的答案，然而卻忽略了貨幣政 策對於國內利率以及美元匯價的影響。1980年代初期的經濟衰退就是緊縮 性貨幣政策影響利率以及美元匯價最有力的證據，其影響不容忽視。預算 赤字本質上並非就會導致對外貿易收支的逆差，傳統看法的論點似乎未著 重於美國國內儲蓄與投資間的差距，而此差距正是預算赤字導致貿易赤字 的先決條件。1980年代外國的經濟政策也是助長美國貿易赤字的形成與擴 大，諸如：日本、台灣與南韓、以及債務危機發生後的拉丁美洲國家所實 施的經濟政策。預算赤字與貿易赤字對於美國未來經濟長期成長的影響為 何，美國預算赤字的持續存在是否會造成硬著陸危機的出現，以及柯林頓 政府的策略性貿易政策，其成效又將如何，都是本篇論文所要深入探討的 主題所在。 Some economists in the 1980s thought that the main cause of the trade deficitwas the federal budget deficit, which was growing enormously and continuously.Due to the expanding fiscal policy adopted by the federal government pushed upthe interest rates, therefore, contributing to the appreciation of U.S. international exchange rate, and thus creating an unfavorable environment for the U.S. exporters, then the unprecedented trade deficit ensued. It israther reasonable but not correct when the conventional wisdom is tested underthe Mundell-Fleming IS-LM model, for the lack of the monetary policy impact upon the interest rate and exchange rate.The recession in the early 1980s was even the most prominent evidence. The conventional wisdom didn't seem to emphasize the saving and investment gap, which was the main concern of the twin deficit linkage,for the budget deficit doesn't per se cause the trade deficit.Foreign economic policies also played important roles in contributing to theexistence and growth of the U.S. trade deficit, for example: Japan, Taiwan and South Korea, as well as the Latin American countries after the Debt Crisis. Economists still couldn't come to a conclusion about the impact of the twindeficits upon the long term economic growth of the U.S. This thesis also focuses on exploring into the possibility whether the U.S. would suffer the"Hard Landing" crisis,the effectiveness of the "Strategic Trade Policy" adoptedby the Clinton Administration that was eager to solve the trade deficit and improve the competition of the U.S. in the 1990s.

Στην παρούσα εργασία εξετάζουμε τους προσδιοριστικούς παράγοντες των δημοσιονομικών ελλειμμάτων καθώς και των ελλειμμάτων στο ισοζύγιο τρεχουσών συναλλαγών. Επίσης, προσπαθούμε να ερευνήσουμε την επίδραση των δημοσιονομικών ελλειμμάτων στα ελλείμματα του ισοζυγίου τρεχουσών συναλλαγών (Υπόθεση δίδυμων ελλειμμάτων). Για το σκοπό αυτό χρησιμοποιούμε ένα δείγμα 27 χωρών του ΟΟΣΑ καλύπτοντας την περίοδο 1994-2006.
In this paper, we examine the determinants of budget deficits and current account deficits. Furthermore, we try to investigate the effect of budget deficits to current account deficits (Twin deficits hypothesis). For this purpose, we use a sample of 27 OECD countries covering the period 1994-2006.

For many developing oil exporting economies, oil revenue contributes to a relatively high percentage of government revenue and to the value of export commodities. The high dependency on oil revenue has raised concern about the impact of oil price shocks on these economies and their vulnerability to oil price fluctuations. In the modern Omani economy, petroleum is a vital economic sector. In 2018, the petroleum sector contributed (i) 40.8% to Omani real gross domestic product (GDP), (ii) 65.3% to Omani’s total exports, and (iii) 78.2% to Omani’s government revenue (NCSI, 2019). A survey by the Central Bank of Oman highlighted a drastic fall in oil prices could be a threat to financial stability in Oman (CBO, 2016b). The first essay of this thesis studies the impact of oil price shocks on fiscal policy and real GDP in the Sultanate of Oman. It employs a Structural Vector Autoregressive (SVAR) model with quarterly frequency data from 1989Q4 to 2016Q4. Impulse responses, variance decomposition analysis, and historical decomposition show that an oil price shock can have a significant impact on government revenue and GDP. An oil price shock explains around 22% and 46% of the variation in the government revenue and GDP, respectively. Decomposing the government revenue and GDP further into petroleum and non-petroleum related components, we find that an oil price shock explains around 26% of the variation in petroleum revenue and 90% of the petroleum-GDP. Petroleum and non-petroleum GDP respond positively to oil price shocks, while they respond negatively to oil price volatility. Government expenditure is not affected by oil prices, but it is affected by government revenue. This result demonstrates that government revenue is the channel through which oil price shocks impact government expenditure. The results also illustrate that the Omani government uses its reserve fund, and local and international debt to smooth, and reduce the impact of oil price fluctuations. The second essay examines the Twin Deficits Hypothesis on the relationship between fiscal and trade balances for Oman, where the fiscal balance heavily relies on oil export revenue. According to the twin deficit hypothesis, the casual effects run from fiscal balance to trade balance. For example, a rise in the budget deficit through tax cuts or government expenditure increases, raises the domestic absorption through import expansions, leading to current account deficit. Therefore, the Twin Deficit Hypothesis may hold for countries where the government expenditure is largely funded through tax revenue. Compared to that, for oil-reliant economies like Oman, taxes contributed only 9.18% of the government revenue in 2018 while oil contributed 78.24% of the revenue. In this paper, we use the SVAR model and a Structural Vector Error Correction (SVECM) model to assess the relationship between Oman’s fiscal and trade balances in the short and long-run. The results show that in the short run, Oman’s trade balance and fiscal balance are mostly determined by oil price movements, where both balances respond positively to oil price shocks and negatively to oil price volatility shocks. The trade balance’s response to oil price shocks is quantitatively larger compared to fiscal balance, while fiscal balance’s response to oil price volatility shocks is larger than trade balance. The fiscal balance responds positively and is statistically significant to trade balance shocks, while the responses of the trade balance to the fiscal balance shocks are statistically insignificant. In the long-run, oil price shocks have a statistically significant positive impact on fiscal revenue, exports, and imports. These results provide strong evidence that in Oman, the casual effect runs from the trade balance to the fiscal balance. In comparison, the fiscal balance is more endogenous, and the Omani government is able to adjust the fiscal policy in response to fluctuations in the oil price and trade balance, thus contradicting the traditional twin deficit hypothesis. We argue that for an oil-dependent small open economy, like Oman, policies that help to diversify away from depending heavily on oil revenue would help the economy to absorb international oil price shocks more effectively. The third essay of the thesis investigates the impact of the global shocks on the Omani economy through trade linkages using the Global Vector Autoregressive (GVAR) model. The main objective is to assess the impact of shocks originating from Oman’s main trading partners, namely China, Japan, Korea, Singapore, Thailand, and the United States. To our knowledge, this is the first study to use the GVAR model to assess shock transmissions to Oman. The GVAR framework allows us to present augmented VAR models that include both domestic and foreign variables such as output, inflation, short-term and long-term interest rates, and exchange rates along with oil price as a global variable. The period of study is from 1989Q4 to 2016Q4. The GVAR model enables us to carry out a rich analysis of the direct and indirect impact of shocks from Oman’s trading partners on its real GDP, petroleum GDP, and non-petroleum GDP. In addition, the use of different trade weights enables us to account for the changing trade patterns over time. The empirical results highlight that any unexpected shocks originating from East Asian economies will have a significant impact on the Omani economy. The impact of China is growing over time and currently has the largest effect, while the impact of Japan is declining. In general, the impact of the United States is modest and similar across times. The trade concentration and over-reliance on a particular destination and commodity could be risky for Oman and thus the Omani government should consider diversifying its trade relation and the composite of products that it exports.

Yes
We provide new evidence that current account balances in Greece, Portugal and Spain have become non-stationary after the adoption of the euro implying that there is no long-run stable relationship between savings and investment contrary to the Feldstein-Horioka puzzle. This can be taken as evidence of unsustainable current account balances and loss of solvency for the underlying economies. Using the ARDL methodology we also report a statistical association between fiscal balances and current account balances which implies that fiscal austerity can help these economies to reduce their current account deficits and restore their competitiveness. Our empirical evidence also suggests a particularly strong significant negative association between domestic investment and current account deficits. The magnitude of this latter effect may have important policy implications concerning the ways in which investment is financed to improve external competitiveness.

Dans le sillage de la récession mondiale de 2008-09, plusieurs questions ont été soulevées dans la littérature économique sur les effets à court et à long terme de la politique budgétaire sur l’activité économique par rapport à son signe, sa taille et sa durée. Ceux-ci ont des implications importantes pour mieux comprendre les canaux de transmission et l’efficacité des politiques budgétaires, avec la politique monétaire étant poursuivi, ainsi que pour leurs retombées économiques. Cette thèse fait partie de ce regain d’intérêt de la littérature d’examiner comment les changements dans la politique budgétaire affectent l’activité économique. Elle repose alors sur trois essais: les effets macroéconomiques des chocs de dépenses publiques et des recettes fiscales, les résultats macroéconomiques de l’interaction entre les politiques budgétaire et monétaire et le lien entre la politique budgétaire et la répartition des revenus. Le premier chapitre examine les effets des chocs de politique budgétaire (chocs de dépenses publiques et chocs de recettes fiscales) sur l’économie canadienne au cours de la période 1970-2010, en s’appuyant sur la méthode d’identification des restrictions de signe développée par Mountford et Uhlig [2009]. En réponse à la récession mondiale, les autorités fiscales dans les économies avancées, dont le Canada ont généralement mis en oeuvre une approche en deux phases pour la politique budgétaire. Tout d’abord, ils ont introduit des plans de relance sans précédent pour relancer leurs économies. Par exemple, les mesures de relance au Canada, introduites à travers le Plan d’action économique du Canada, ont été projetées à 3.2 pour cent du PIB dans le budget fédéral de 2009 tandis que l’ "American Recovery and Reinvestment Act"(ARRA) a été estimé à 7 pour cent du PIB. Par la suite, ils ont mis en place des plans d’ajustement en vue de réduire la dette publique et en assurer la soutenabilité à long terme. Dans ce contexte, évaluer les effets multiplicateurs de la politique budgétaire est important en vue d’informer sur l'efficacité de telles mesures dans la relance ou non de l'activité économique. Les résultats montrent que les multiplicateurs d'impôt varient entre 0.2 et 0.5, tandis que les multiplicateurs de dépenses varient entre 0.2 et 1.1. Les multiplicateurs des dépenses ont tendance à être plus grand que les multiplicateurs des recettes fiscales au cours des deux dernières décennies. Comme implications de politique économique, ces résultats tendent à suggérer que les ajustements budgétaires par le biais de grandes réductions de dépenses publiques pourraient être plus dommageable pour l'économie que des ajustements budgétaires par la hausse des impôts. Le deuxième chapitre, co-écrit avec Constant Lonkeng Ngouana, estime les effets multiplicateurs des dépenses publiques aux Etats-Unis en fonction du cycle de la politique monétaire. Les chocs de dépenses publiques sont identifiés comme étant des erreurs de prévision du taux de croissance des dépenses publiques à partir des données d'Enquêtes des prévisionnistes professionnels et des informations contenues dans le "Greenbook". L'état de la politique monétaire est déduite à partir de la déviation du taux des fonds fédéraux du taux cible de la Réserve Fédérale, en faisant recours à une fonction lisse de transition. L'application de la méthode des «projections locales» aux données trimestrielles américaines au cours de la période 1965-2012 suggère que les effets multiplicateurs des dépenses fédérales sont sensiblement plus élevées quand la politique monétaire est accommodante que lorsqu'elle ne l'est pas. Les résultats suggèrent aussi que les dépenses fédérales peuvent stimuler ou non la consommation privée, dépendamment du degré d’accommodation de la politique monétaire. Ce dernier résultat réconcilie ainsi, sur la base d’un cadre unifié des résultats autrement contradictoires à première vue dans la littérature. Ces résultats ont d'importantes implications de politique économique. Ils suggèrent globalement que la politique budgétaire est plus efficace lorsqu'on en a le plus besoin (par exemple, lorsque le taux de chômage est élevé), si elle est soutenue par la politique monétaire. Ils ont également des implications pour la normalisation des conditions monétaires dans les pays avancés: la sortie des politiques monétaires non-conventionnelles conduirait à des multiplicateurs de dépenses fédérales beaucoup plus faibles qu'autrement, même si le niveau de chômage restait élevé. Ceci renforce la nécessité d'une calibration prudente du calendrier de sortie des politiques monétaires non-conventionnelles. Le troisième chapitre examine l'impact des mesures d'expansion et de contraction budgétaire sur la distribution des revenus dans un panel de 18 pays d'Amérique latine au cours de la période 1990-2010, avec un accent sur les deniers 40 pour cent. Il explore alors comment ces mesures fiscales ainsi que leur composition affectent la croissance des revenus des dernier 40 pour cent, la croissance de leur part de revenu ainsi que la croissance économique. Les mesures d'expansion et de contraction budgétaire sont identifiées par des périodes au cours desquels il existe une variation significative du déficit primaire corrigé des variations conjoncturelles en pourcentage du PIB. Les résultats montrent qu'en moyenne l'expansion budgétaire par la hausse des dépenses publiques est plus favorable à la croissance des revenus des moins bien-nantis que celle par la baisse des impôts. Ce résultat est principalement soutenu par la hausse des dépenses gouvernementales de consommation courante, les transferts et subventions. En outre ces mesures d’expansion budgétaire sont favorables à la réduction des inégalités car elles permettent d'améliorer la part des revenus des moins bien-nantis tout en réduisant la part des revenus des mieux-nantis de la distribution des revenus. En outre ces mesures d’expansion budgétaire sont favorables à la réduction des inégalités car elles permettent d'améliorer la part des revenus des moins bien-nantis tout en réduisant la part des revenus des mieux-nantis de la distribution des revenus. Cependant, l'expansion budgétaire pourrait soit n'avoir aucun effet sur la croissance économique ou entraver cette dernière à travers la hausse des dépenses en capital. Les résultats relatifs à la contraction budgétaire sont quelque peu mitigés. Parfois, les mesures de contraction budgétaire sont associées à une baisse de la croissance des revenus des moins bien nantis et à une hausse des inégalités, parfois l'impact de ces mesures est non significatif. Par ailleurs, aucune des mesures n’affecte de manière significative la croissance du PIB. Comme implications de politique économique, les pays avec une certaine marge de manœuvre budgétaire pourraient entamer ou continuer à mettre en œuvre des programmes de "filets de sauvetage"--par exemple les programmes de transfert monétaire conditionnel--permettant aux segments vulnérables de la population de faire face à des chocs négatifs et aussi d'améliorer leur conditions de vie. Avec un potentiel de stimuler l'emploi peu qualifié, une relance budgétaire sage par les dépenses publique courantes pourrait également jouer un rôle important pour la réduction des inégalités. Aussi, pour éviter que les dépenses en capital freinent la croissance économique, les projets d'investissements publics efficients devraient être prioritaires dans le processus d'élaboration des politiques. Ce qui passe par la mise en œuvre des projets d'investissement avec une productivité plus élevée capable de générer la croissance économique nécessaire pour réduire les inégalités.
In the wake of the 2008-09 Global Recession, several issues have been raised in the economic literature about the short and long-run effects of fiscal policy on economic activity with respect to its signs, its size and its duration. These have important implications to better understand the transmission channels and the effectiveness of fiscal policies, along with the monetary policy being pursued, as well as for their economic fallouts. This dissertation is part of this renewed strand of literature to assess how changes in fiscal policy affect economic activity. It therefore relies on three essays: the macroeconomic effects of government spending and tax revenue shocks, the economic outcomes of the interaction between fiscal and monetary policies and the nexus between fiscal policy and income distribution. The first chapter examines the effects of fiscal policy shocks (government spending and tax revenue shocks) on the Canadian economy, building on the sign-restrictions-VAR approach developed by Mountford and Uhlig [2009]. In response to the Global Recession, fiscal authorities in advanced economies including Canada typically implemented a two-phase approach to fiscal policy. First, they introduced unprecedented stimulus packages to revive their economies. For instance, stimulus measures in Canada, introduced through Canada's Economic Action Plan, were projected at 3.2 percent of GDP in the 2009 federal budget while the American Recovery and Reinvestment Act (ARRA) was estimated at 7 percent of GDP. Following the stimulus, they shifted gears, adopting adjustment plans to reduce public debt and ensure long-term fiscal sustainability. Against this backdrop, examining the size of fiscal multiplier is important to informing the effectiveness of such policy measures in reviving or not economic activity. I find that tax-cut multipliers vary between 0.2 and 0.5, while spending multipliers range between 0.2 and 1.1. Spending multipliers tend to be larger than tax-cut multipliers over the last two decades. For policy implications, these results tend to suggest that fiscal consolidations through large spending cuts could be more harmful to the economy than tax-based fiscal adjustments. The second chapter, co-written with Constant Lonkeng Ngouana, provides estimates of the US government spending multiplier over the monetary policy cycle. Government spending shocks are identified as forecast errors of the growth rate of government spending from the Survey of Professional Forecasters (SPF) and from the Greenbook record, further stripped from their predictable components. The state of monetary policy is inferred from the deviation of the Fed funds rate from the target rate, using a smooth transition function. Applying the local projections method to quarterly US data over the period 1965-2012, results show that the federal government spending multiplier is substantially higher under accommodative than non-accommodative monetary policy. The estimations also suggest that federal government spending may crowd-in or crowd-out private consumption, depending on the extent of monetary policy accommodation. The latter result reconciles---in a unified framework---apparently contradictory findings in the literature. These findings have important policy implications. They broadly suggest that fiscal policy is more effective when needed the most (e.g., at times of slack), if supported by monetary policy. They also have implications for the normalization of monetary conditions in advanced economies: the exit from UMP would lead to much lower federal government spending multipliers than otherwise, even if some amount of slack was to remain in the economy. This further highlights the need for a careful calibration of the timing of exit from unconventional monetary policy. The third chapter examines the impact of fiscal expansion and fiscal contraction measures on income distribution in a panel of 18 Latin American countries over the period 1990-2010, with a focus on the bottom 40 percent. It therefore explores how these fiscal measures and their composition have affected the income growth of the bottom 40 percent, their income share growth and economic growth. Fiscal expansions and fiscal consolidations are identified by periods for which there is a significant change in the cyclically-adjusted primary deficit as share of GDP. I find that on average, expenditures-based fiscal expansion are more likely to increase the income of the bottom 40 percent than revenues-based fiscal expansion. This result is mainly driven by government current consumption, transfers and subsidies. In addition, these fiscal expansion measures help to reduce income inequality by improving the income share of the bottom segments of the population while reducing the top income share. However, fiscal expansion could either have no effect on economic growth or prevent the latter through capital expenditures increases. Results for fiscal consolidation are somewhat mixed. Sometime, fiscal consolidation is associated with a decline of the income growth of the less well-off and rising inequality, sometime the impact is non-significant. None of the fiscal contraction measures affects significantly GDP growth. These findings have important policy implications. Countries with some fiscal space could initiate or continue to implement safety nets program--like conditional cash transfer programs--necessary to prevent the vulnerable segment of the population to adverse shocks and to improve their living standards. With a potential of stimulating low-skill employment, a wise fiscal stimulus through government current consumption increases could also play a significant role to reduce income inequality. Also, to avoid capital expenditures that hinder economic growth, efficient public investment projects should be prioritized in the policy making process. This consists of implementing investment projects with higher productivity that can enhance economic growth necessary to reduce inequality.

Dissertação de mestrado em Economia
A hipótese dos défices gémeos postula que o défice orçamental e o défice externo estão relacionados positivamente e a direção de causalidade verifica-se do primeiro para o segundo défice. A sua origem remonta à década de 80, nos Estados Unidos da América, quando o saldo orçamental e o saldo comercial se deterioraram de forma quase simultânea. Recentemente, com a crise financeira internacional e a crise da zona euro, os desequilíbrios internos e externos têm assumido uma importância crescente nas economias europeias, o que reacendeu o debate sobre os défices gémeos. Deste modo, este trabalho pretende analisar a relação causal entre o saldo orçamental e o saldo da balança corrente para os países fundadores da Área do Euro (incluindo a Grécia), dividindo-se a amostra em dois grupos de países: países centrais (Alemanha, Áustria, Bélgica, Finlândia, França, Holanda e Luxemburgo) e países periféricos (Espanha, Grécia, Irlanda, Itália e Portugal). Foram utilizados dados anuais, para o período 1995-2017, recorrendo ao Vetor Autorregressivo em painel, cujos os resultados são interpretados recorrendo aos testes de causalidade à Granger, funções de impulso resposta ortogonais e decomposição da variância do erro. Os resultados dos testes de causalidade à Granger, para os países centrais, sugerem fortemente a causalidade do saldo da balança corrente para o saldo orçamental. Nos países periféricos, os resultados sugerem a existência de influência bilateral entre os dois saldos, embora a causalidade do saldo da balança corrente para o saldo orçamental esteja mais fortemente evidenciada. Os resultados das funções de impulso resposta, em ambos os grupos de países, mostram que apenas o choque positivo no saldo da balança corrente leva a uma resposta positiva e estatisticamente significativa por parte do saldo orçamental, entre o 1º e o 8º período. Por último, a magnitude dos choques é analisada com a decomposição da variância do erro. Os resultados sugerem que, nos dois conjuntos de países, o impacto do saldo da balança corrente sobre o saldo orçamental é mais forte. Nos países centrais, o choque no saldo da balança corrente explica mais de 40% da variância do saldo orçamental entre o 9º e o 10º período. Nos países periféricos, o choque no saldo da balança corrente explica mais de 30% da variância do saldo orçamental entre o 5º e o 10º período.
The twin deficits hypothesis postulates that the budget deficit and the external deficit are positively related and the causal relationship runs from the first to the second deficit. Its origin dates to the 80´s, in the United States of America, when the budget balance and the trade balance deteriorated almost simultaneously. Recently, with the global financial crisis and the Eurozone crisis, internal and external imbalances have taken on a growing importance in European economies, which has rekindled the debate on twin deficits. Thus, this work intends to analyze the causal relationship between the budget balance and the current account balance for the founding countries of the Eurozone (including Greece), dividing the sample into two groups of countries: core countries (Germany, Austria, Belgium, Finland, France, Netherlands and Luxembourg) and peripheral countries (Spain, Greece, Ireland, Italy and Portugal). Annual data were used for the period 1995-2017, using the Panel Vector Autoregressive, whose results are interpreted using the Granger causality tests, orthogonal impulse response functions and error variance decomposition. The results of the Granger causality tests, for the core countries, strongly suggest that the causality runs from the current account balance to the budget balance. In peripheral countries, the results suggest the existence of bilateral influence between the two balances, although the causality from current account balance to the budget balance is more strongly evidenced. The results of the impulse response functions, in both groups of countries, show that only the positive shock on the current account balance leads to a positive and statistically significant response of the budget balance, between the 1st and 8th period. Last of all, the magnitude of the shocks is analyzed with the error variance decomposition. The results suggest that, in the two groups of countries, the impact of the current account balance on the budget balance is stronger. In the core countries, the impact on the current account balance accounts for more than 40% of the budget balance variance between the 9th and 10th period. In the peripheral countries, the impact on the current account balance accounts for more than 30% of the budget balance variance between the 5th and 10th period.