This paper discusses recent empirical research on the interplay between fiscal policies and external imbalances in the G3 countries, focusing on the stock-flow dynamics of public and foreign deficits and debt accumulation

In 1980 Turkey embarked on a far-reaching stabilization and liberalization program, which contributed to export-led growth and a significant movement toward both domestic and external equilibrium. Later, as fiscal policy was partly reoriented from a restrictive to an expansionary stance while...