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This paper investigates the effects of fiscal policy on the trade balance using a structural factor model. A fiscal policy shock worsens the trade balance and produces an appreciation of the domestic currency but the effects are quantitatively small. The findings match the theoretical...

Twin deficit hypothesis mainly states that government budget deficits will cause trade deficits. However, this is not the only theoretically possible relationship between the budget deficit and the trade deficit. On the other extreme if Ricardian equivalence hypothesis holds it is also possible...

Relations between national public and private savings, domestic investment, and the current account are analyzed with the Global Econometric Model (National Institute, London). Simulation results obtained with this full modeling approach for the US, Japan, Germany and the UK are compared with...

TTwin deficit hypothesis indicates the existance of a relationship between budget deficits and current account. The implications of Conventional Keynesian Theory, which asserts that budget deficits induces current account deficits, are different from the Ricardian Equivalance Theory , which...

Trend and cyclical patterns of household, business, government, and foreign net borrowing shares of gross domestic product are reviewed using diagrams and covariance decompositions of the identity stating that the sum of the shares equals zero. Household and business net borrowing shares and...