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- Title
The Effect of Fiscal Deficit on the External Imbalances in the European Union.
- Authors
Josifidis, Kosta; Mitrović, Radmila Dragutinović; Bodor, Slađana
- Abstract
This paper analyzes the effect of the fiscal deficit on the current account deficit in the European Union during the period 1995-2018. The purpose is to examine to what extent an increase in government spending affects the deterioration of terms of trade and contributes to increasing external imbalances. Econometric methods for heterogeneous panel data models are used to analyse the existence of a long-run relationship between the fiscal deficit and the current account. The empirical findings indicate that the twin deficits hypothesis is not confirmed for the whole European Union, but only for a certain number of member states, where a long-run relationship still exists, confirming the impact of the fiscal deficit on the current account.
- Subjects
EUROPEAN Union; PANEL analysis; TERMS of trade; PUBLIC spending; BALANCE of payments; DATA modeling
- Publication
Panoeconomicus, 2021, Vol 68, Issue 5, p625
- ISSN
1452-595X
- Publication type
Article
- DOI
10.2298/PAN190523017J