Highly indebted developing economies commonly also hold large external reserves. This behavior seems puzzling given that governments in these countries borrow with an interest rate penalty to compensate lenders for default risk. Reducing debt to the same extent as reserves would maintain net...

Risk of sovereign debt default has frequently affected emerging market and developed economies. Such financial crisis are often accompanied with severe declines of employment that are hard to justify using a standard dynamic stochastic model. In this paper, I document that a labor wedge...

Highly indebted developing economies commonly also hold large external reserves. This behavior seems puzzling given that governments in these countries borrow with an interest rate penalty to compensate lenders for default risk. Reducing debt to the same extent as reserves would maintain net...

Economies around the world tend to show a strong link from fiscal to current accounts deficits. The phenomenon is recognized as the twin-deficits doctrine, which stipulates the presence of a uni-directional causal relationship from the fiscal account deficit (FD) to the current account deficit...

This paper aims to analyze the possibility of the twin deficits hypothesis existing in the context of Bangladesh using annual data from 1980 to 2017. Vector Error-Correction approach is tapped to estimate the short and long run coefficients while the pairwise Granger causality analysis is...

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 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...

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...

Highly indebted developing economies commonly also hold large external reserves. This behavior seems puzzling given that governments in these countries borrow with an interest rate penalty to compensate lenders for default risk. Reducing debt to the same extent as reserves would maintain net...

Risk of sovereign debt default has frequently affected emerging market and developed economies. Such financial crisis are often accompanied with severe declines of employment that are hard to justify using a standard dynamic stochastic model. In this paper, I document that a labor wedge...