This paper explores the relationship between fiscal deficit, trade deficit and private consumption in European countries in the years 1970-2010. The aim of the study is to test empirically the validity and rationale of the Keynesian proposition (conventional view or Twin Deficits hypothesis) and...

We assess the sustainability of external imbalances for EU countries using panel stationarity tests of Current Account (CA) balance-to-GDP ratios and panel co-integration of exports and imports of goods and services, for the period 1970Q1–2015Q4. We find that: i) the country panel is...

We examine the regional and global growth effects of current account imbalances in Japan, Germany, and the People's Republic of China (PRC)—the three largest persistent surplus countries—and the United States and United Kingdom, the two largest persistent deficit countries. Controlling for a...

We propose a multi-country dynamic general equilibrium model to quantify the implications of trade and FDI liberalizations for the surge of global trade and current account (CA) imbalances. We calibrate our model to replicate the evolution of bilateral trade and FDI flows across 5 major...

We study the effects of tax shocks on the budget and external deficits for 16 industrialized countries over the post-1975 period. Our structural approach is based on a tractable small open-economy model where a tax cut innovation generates a budget deficit. In turn, the budget deficit affects...

The United States has a large and persistent current account deficit. Yet, U.S.'s income receipts from the rest of the world have exceeded its income payments to the rest of the world for many years. This appears to be paradoxical because for a country with a negative net foreign assets...

This paper explores, from an investment-saving perspective, the factors underlying the persistent widening of the current account surplus in the Netherlands since the early 1980s. Standard intertemporal models, even appropriately extended to incorporate specific features of the Dutch economy, do...

We assess the sustainability of the current account (CA) balance, net international investment position (NIIP) and net external debt (NED) in a sample of EU countries using two complementary approaches. First, we employ both time-series and panel-data stationarity tests of current account...

This study divides the world into currency zones according to the co-movement of each currency with the key currencies. The dollar zone groups economies that produce well over half of global GDP. The euro zone now includes almost all of Europe and some commodity producers, but remains less than...

On average, foreign corporations save a third of their local profits in the host country. While this is recorded as "Retained Earnings Foreign Direct Investment" (REFDI), macroeconomics has so far overlooked its particularities. This paper explores the aggregate economic properties of REFDI. It...