Arbeitspapier

Tax and spending shocks in the open economy: Are the deficits twins?

We present evidence on the open economy consequences of US fiscal policy shocks identified through proxy-instrumental variables. Tax shocks and government spending shocks that raise the government budget deficit lead to persistent current account deficits. In particular, the negative response of the current account to exogenous tax reductions through a surge in the demand for imports is among the strongest and most precisely estimated effects. Moreover, we find that the reduction of the current account is amplified when the tax reduction is due to lower personal income taxes and when the government increases its consumption expenditures. Historically, a much larger share of current account dynamics has been due to tax shocks than to government spending shocks.

Sprache
Englisch

Erschienen in
Series: Sveriges Riksbank Working Paper Series ; No. 377

Klassifikation
Wirtschaft
Business Fluctuations; Cycles
Fiscal Policy
Open Economy Macroeconomics
Thema
Tax policy
government spending
proxy-vector autoregressions
current account
twin deficits

Ereignis
Geistige Schöpfung
(wer)
Klein, Mathias
Linnemann, Ludger
Ereignis
Veröffentlichung
(wer)
Sveriges Riksbank
(wo)
Stockholm
(wann)
2019

Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Klein, Mathias
  • Linnemann, Ludger
  • Sveriges Riksbank

Entstanden

  • 2019

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