In spite of the concerns about "twin deficits" (fiscal and current account deficits) for the U.S., empirical evidence suggests that “twin divergence” is a more regular feature of the data: when the fiscal accounts worsen, the current account improves and vice versa. We thus study empirically...

This paper uses a panel VAR model to improve upon the existing literature on interregional risk sharing channels (e.g. Asdrubali, Sorensen and Yosha, 1996) in several respects. First, it endogenizes the output process within a multi-equation framework, capturing the dynamic feedback between...