Twin Deficits through the Looking Glass: Time-Varying Analysis in the Euro Area

Arbeitspapier

Using two measures of the fiscal position, the cyclically adjusted primary budget balance (CAPB) and the total budget balance, we assess the Twin Deficit Hypothesis for the Euro Area in the period 1995-2020. Furthermore, we estimate time-varying coefficients of the current account balance responses to changes in the CAPB and in the government balance and we identify the determinants of these responses. The CAPB and the government balance, in addition to being determinants of the current account balance, are also determinants of the time-varying responses of the current account balance. The levels of government balance, current account balance and public debt, as a percentage of GDP, and the temporal period (before and after 2010) also influence these responses.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9559

Classification and Topics

• Classification: Wirtschaft ; Current Account Adjustment; Short-term Capital Movements ; Open Economy Macroeconomics ; National Deficit; Surplus ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
• Subject: CAPB ; government balance ; current account balance ; time-varying coefficients ; Eurozone ; panel data

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Afonso, António ; Coelho, José Carlos
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/252076
• Last update: 10.03.2025, 11:45 AM CET