This paper assesses the impact of both monetary and fiscal policy along with other macroeconomic determinants on economic activity using state-level Indian data. Since economic activity can vary across states due to local factors and state government policies, a state-level empirical analysis,...

This paper studies the impact of the state-dependent risk of a government default on the correlation of the scal balance and current account. We use a small open economy model where nonlinear risk premia arise endogenously when the government operates close to its scal limit, i.e. the maximum...

We analyse Ricardian Equivalence in open economy using a panel of 18 developed countries for 1973-1998. We use a dynamic panel estimated via instrumental variables and we discuss why this specification should be preferred to a static model estimated via ordinary least squares. We find a...

Currently the U.S. is experiencing record budget and current account deficits, a phenomenon familiar from the Twin Deficits discussion of the 1980s. In contrast, during the 1990s productivity growth has been identified as the primary cause of the U.S. current account deficit. We suggest a...

Background An econometric analysis of the twin deficit hypothesis is of special importance for the Republic of North Macedonia in view of its perspective membership in the European Union and from the point of view of its macroeconomic stability in the long run. Objectives The objective of this...

The U.S. Bureau of Economic Analysis (BEA) estimates the return on investments of foreign subsidiaries of U.S. multinational companies over the period 1982-2006 averaged 9.4 percent annually after taxes; U.S. subsidiaries of foreign multinationals averaged only 3.2 percent. Two factors distort...

This paper investigates how oil price shocks affect the trade balance and terms of trade in a two country DSGE model. We show that the response of the external sector depends critically on the structure of financial market risk-sharing. Under incomplete markets, higher oil prices reduce the...

The business cycles of advanced economies are synchronized. Standard macro models fail to explain that fact. This paper presents a simple model of a two-country, two-traded good, complete-financial-markets world in which country-specific productivity shocks generate business cycles that are...

An unresolved issue in international macroeconomics is the apparent lack of risk-sharing across countries, which contradicts the prediction of models based on the assumption of complete markets. We assess the importance of financial frictions in this issue by constructing an incomplete market...

This paper provides an empirical investigation of the medium-term determinants of current accounts for a large sample of industrial and developing countries, utilizing an approach that highlights macroeconomic determinants of longer-term saving and investment balances. Cross section and panel...