Fiscal Deficits and Current Account Deficits [electronic resource] Kumhof, Michael.
- Washington, D.C. : International Monetary Fund, 2009.
- IMF eLibrary
IMF Working Papers; Working Paper No. 09/237.
IMF Working Papers; Working Paper No. 09/237
- Government document
1 online resource (35 p.)
- Local subjects:
- Account deficits.
Balance of payments.
Current account balance.
Current account balances.
Current account deficit.
Current account deficits.
Fiscal policy on consumption.
Government budget constraint.
Gross domestic product.
Increase in consumption.
International Policy Coordination and Transmission.
Open Economy Macroeconomics.
Public Expenditures, Investment, and Finance.
Stock of debt.
- The effectiveness of recent fiscal stimulus packages significantly depends on the assumption of non-Ricardian savings behavior. We show that, under the same assumption, fiscal deficits can have worrisome implications if they turn out to be permanent. First, if they occur in large countries they significantly raise the world real interest rate. Second, they cause a short run current account deterioration equal to around 50 percent of the fiscal deficit deterioration. Third, the longer run current account deterioration equals almost 75 percent for a large economy such as the United States, and almost 100 percent for a small open economy.
- Description based on print version record.
- Kumhof, Michael.
- Other format:
- Print Version:
- Publisher Number:
- Access Restriction:
- Restricted for use by site license.
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