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Authors
Advisor(s)
Abstract(s)
We investigate the existence of Granger-causality between current account and government budget balances over the period 1970-2007, for different EU and OECD country groupings. We use a panel-data approach based on SUR systems and Wald tests with country specific bootstrap critical values. Our results show a causal relation from budget deficits to current account deficits for several EU countries: Bulgaria, Czech Republic, Estonia, Finland, France, Italy, Hungary, Lithuania, Poland, and Slovakia, along the lines of the so-called twin-deficit relationship. Considering the effective real exchange rate in the SUR system does not substantially alter the results.
Description
Keywords
Panel Causality Tests Budget Deficit External Imbalance Real Exchange Rates EU OECD
Pedagogical Context
Citation
Afonso, António, Christophe Rault. 2009. "Bootstrap panel Granger-causality between government budget and external deficits for the EU". Instituto Superior de Economia e Gestão - DE Working papers nº 2-2009/DE/UECE
Publisher
ISEG – Departamento de Economia