For a small open economy with fixed exchange rate regime, the twin deficit hypothesis is always an interesting and relevant research topic. The aim of this research is to evaluate the effects of the government budget shocks on the current account movement in the case of the Macedonian economy,...

We present evidence on the open economy consequences of US fiscal policy shocks identified through proxy-instrumental variables. Tax shocks and government spending shocks that raise the government budget deficit lead to persistent current account deficits. In particular, the negative response of...