Fiscal Deficits and Current Account Deficits

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.
Publication date: October 2009
ISBN: 9781451873849
$18.00
Add to Cart by clicking price of the language and format you'd like to purchase
Available Languages and Formats
English
Prices in red indicate formats that are not yet available but are forthcoming.
Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Economics- Macroeconomics , International - Economics , Non-Ricardian Households , Government Deficits , Global Current Account Imbalances , current account , fiscal deficits , government spending , Open Economy Macroeconomics , International Policy Coordination and Transmission , Fiscal Policies and Behavior of Economic Agen

Summary