Browsing by Author "Huart, Florence"
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- Assessing the sustainability of external imbalances in the European UnionPublication . Afonso, António; Huart, Florence; Jalles, João Tovar; Stanek, PiotrExternal imbalances are a greater source of concern than public deficits and debts in some countries of the European Union, given their size and evolution. The new macroeconomic imbalance procedure (MIP), which aims at preventing these imbalances, relies on the surveillance of macroeconomic indicators. Some thresholds have been defined for the current account balance and the net international investment position (NIIP), but not for the NED which is taken as an auxiliary indicator in the MIP scoreboard. Prompted by these thresholds, we carried out an analysis of external debt sustainability of EU countries.
- Assessing the sustainability of external imbalances in the European UnionPublication . Afonso, António; Huart, Florence; Jalles, João Tovar; Stanek, PiotrWe 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 balance-to-GDP ratios as well as cointegration tests of exports and imports of goods and services. Second, we assess the level of trade balance that stabilizes the NIIP and the NED. We find that there is sustainability of the CA balance mainly in a few surplus countries whereas there is more concern about the sustainability of the NIIP or NED in countries with a credit position than in countries with a debit position. Both approaches are consistent with each other given the relationship between flows and stocks, the existence of important structural breaks, and valuation effects via the exchange rate.
- Assessing the sustainability of external imbalances in the European UnionPublication . Afonso, António; Huart, Florence; Jalles, João Tovar; Stanek, PiotrWe 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 balance-to-GDP ratios as well as cointegration tests of exports and imports of goods and services. Second, we assess the level of trade balance that stabilizes the NIIP and the NED. We find that there is sustainability of the CA balance mainly in a few surplus countries whereas there is more concern about the sustainability of the NIIP or NED in countries with a credit position than in countries with a debit position. Both approaches are consistent with each other given the relationship between flows and stocks, the existence of important structural breaks, and valuation effects via the exchange rate.
- International transmission of interest rates : the role of international reserves and sovereign debtPublication . Afonso, António; Huart, Florence; Jalles, João Tovar; Stanek, PiotrWe analyse the international transmission of interest rates by focusing on the role of the accumulation of international reserves and on the financing of sovereign debt. An increase in foreign exchange reserves is expected to moderate the influence of U.S. interest rates. However, a high level of government debt raises the sovereign risk premium. Moreover, an increase in the stock of government debt denominated in foreign currency may increase the expected rate of depreciation of the domestic currency. We explain the theoretical mechanisms in a model, which describes the money market equilibrium in an economy with capital account openness. Then, we test the predictions of the model for a panel of advanced and developing economies over the period 1970-2018. Our main findings are: i) significant spillovers from the U.S. interest rates to other countries, mostly for Advanced Economies; ii) a dampening effect of the share of external liabilities in the domestic currency, clearly a determinant of risk premium; iii) a negative effect of international reserves on interest rates, as expected; iv) higher reserves decrease risk premia, for long-term interest rates; v) the significance of spillovers fades once the sovereign debt reaches 100% of GDP in developed countries.
- Long-run relationship between exports and imports : current account sustainability tests for the EUPublication . Afonso, António; Huart, Florence; Jalles, João Tovar; Stanek, PiotrWe assess the sustainability of external imbalances for EU countries using panel stationarity tests of Current Account (CA) balance-to-GDP ratios and panel cointegration of exports and imports of goods and services, for the period 1970Q1-2015Q4. We find that: i) the country panel is non-stationary; ii) cross-sectional dependence plays an important role; iii) there is non-stationarity of the CA, imports, and exports with cross-sectional panel dependence and multiple structural breaks; iv) however, there is a stable long-run relationship between exports and imports in the panel. Hence, trade imbalances can be less unsustainable but this is not sufficient to make current account imbalances sustainable.
- Long-run relationship between exports and imports: current account sustainability tests for the EUPublication . Afonso, António; Huart, Florence; Jalles, João Tovar; Stanek, PiotrWe assess the sustainability of external imbalances for EU countries using panel stationarity tests of Current Account (CA) balance-to-GDP ratios and panel cointegration of exports and imports of goods and services, for the period 1970Q1– 2015Q4. We find that: i) the country panel is non-stationary; ii) cross-sectional dependence plays an important role; iii) there is non-stationarity of the CA, imports, and exports with cross-sectional panel dependence and multiple structural breaks; iv) however, there is a stable long-run relationship between exports and imports in the panel. Hence, trade imbalances can be less unsustainable but this is not sufficient to make current account imbalances sustainable.
- Twin deficits revisited : a role for fiscal institutions?Publication . Afonso, António; Huart, Florence; Jalles, João Tovar; Stanek, PiotrWe revisit the twin deficit relationship for a sample of 193 countries over the period 1980-2016, using a panel fixed effect (within-group) estimator, bias-corrected least-squares dummy variable, system GMM, and common correlated effects pooled estimation procedures. The analysis accounts also for the existence of fiscal rules in place, their features, and their interaction with the budget balance. In the absence of fiscal rules, the twin deficit hypothesis is confirmed. The size of the estimated coefficient on the budget balance is between 0.68 and 0.79. However, the existence of fiscal rules strongly reduces the effect of budget balance on the current account balance (the coefficient is reduced to 0.1). In fact, the twin deficits relationship does not hold with some specific kinds of rules: debt rules, rules with monitoring of compliance, as well as budget balance rules and debt rules in emerging market economies and lowest income countries, and in the post-crisis period.
- Twin deficits revisited: A role for fiscal institutions?Publication . Afonso, António; Huart, Florence; Jalles, João Tovar; Stanek, PiotrWe revisit the twin-deficits relationship for a sample of 65 countries with fiscal rules over the period 1985–2015, using a panel data estimation methods. Our analysis accounts for the role of various types of fiscal rules and institutions: expenditure rules, revenue rules, budget balance rules, debt rules, fiscal councils, and supporting procedures. We find that the twin-deficits hypothesis is confirmed. The impact of the budget balance on the current account balance is increased when fiscal rules are considered, except with revenue rules and debt rules. Well-designed fiscal rules, fiscal councils and features that reinforce compliance with rules improve the current account balance. Our findings highlight the role of fiscal factors in explaining sustained global current account imbalances. They also contribute to the ongoing discussion about the improvement of macroeconomic and budgetary surveillance in the European context.