Cover IMF Working Papers
Buy Book in Print
Twin Deficits in Developing Economies
Author:
Davide Furceri null

Search for other papers by Davide Furceri in
Current site
Google Scholar Close
and
Ms. Aleksandra Zdzienicka
Search for other papers by Ms. Aleksandra Zdzienicka in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2018: Issue 170
Language:
English
Publication Date:
27 Jul 2018
DOI:
https://doi.org/10.5089/9781484364000.001
ISBN:
9781484364000
ISSN:
1018-5941
Pages:
41
Keywords:
WP; exchange rate
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (1.8 MB) Download Epub
This paper provides new evidence on the existence and magnitude of the “twin deficits” in developing economies. It finds that a one percent of GDP unanticipated increase in the government budget balance improves, on average, the current account balance by 0.8 percentage point of GDP. This effect is substantially larger than that obtained using standard measures of fiscal impulse, such as the cyclically-adjusted budget balance. The results point to heterogeneity across countries and over time. The effect tends to be larger: (i) during recessions; in countries (ii) that are more open to trade; (iii) that have less flexible exchange rate regimes; and (iv) with lower initial public debt-to-GDP ratios.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund