Origins and implications of twin deficits occurrence in a large scale of countries seems to be a center of rigorous empirical as well as theoretical investigation for decades. The reality of persisting fiscal and current account deficits became obvious in many advanced as well as advancing,...

This paper seeks to analyse the determinants of capital flight in selected Latin American countries throughout the 1990s, and gives some insights into what economic policies would be adequate under capital flight conditions. Finding, empirically, the saving rate to be a new determinant of...

The macroeconomic literature has found puzzling effects of government spending on private consumption, the real exchange rate and the terms of trade. Some authors find that private consumption increases after a shock to government spending, while others report a decrease. The same ambiguity can...

This article reexamines the thesis that fiscal deficits cause trade deficits and challenges this explanation of the twin deficits with the following propositions. Differences in competitiveness among nations do not lead to balanced trade. Using a Eurozone case study, the article discusses the...

The paper studies the short run and long run effects of a production subsidy to the tourism sector of a small open economy, which can also be thought as a region within a country. We introduce a two-sector dynamic general equilibrium model where the tourism sector is considered to be...

Recent research has demonstrated that while government expenditures are countercyclical in most industrialized countries, they tend to be procyclical in developing countries. We develop a dynamic political-economy model to explain this phenomenon. Simulations of the model allow us to...

This paper explores the dynamics of the Greek public debt. It supports that, first, the public debt is unsustainable and, second, the reduction in government expenditures and the cut in unit labour costs in the private sector seems to be the only available, al-though too little too late...

This paper studies optimal monetary and fiscal policy in a small open economy. Two forces in the economy impose orthogonal restrictions on financing costs across governments. The first force requires constant financing costs across governments to have time consistent optimal policy of hours. The...

Prior to the Asian crisis, benign liquidity conditions contributed to credit expansion and overinvestment in the East Asian economies until they were hit by a deep recession (Saxena and Wong 2002). Similarly to the developments in the tiger economies in the nineties, the CEE economies grew...

Exchange rate unexpected fluctuations determine economic development of countries the way quite similar to any other type of exogenous shocks. Unpredicted volatility in exchange rate short-run path affects macroeconomic performance the way that may be a subject of academic as well as economic...