Volume 24, Issue 2 (Summer 2019)
JPBUD 2019, 24(2): 81-112 |
Back to browse issues page
Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
Nasirpour A, Sharifi-Renani H, Daei Karimzadeh S, Basirat M. (2019). An Analysis of the Effects of Monetary and Fiscal Policies on the Current Account Deficit in Selected Oil Exporting Countries: A P-VAR Approach. JPBUD. 24(2), 81-112. doi:10.29252/jpbud.24.2.81
URL: http://jpbud.ir/article-1-1757-en.html
URL: http://jpbud.ir/article-1-1757-en.html
1- Department of Economics, Islamic Azad University, Isfahan (Khorasgan) Branch, Isfahan, Iran.
2- Department of Economics, Islamic Azad University, Isfahan (Khorasgan) Branch, Isfahan, Iran ,h.sharifi@khuisf.ac.ir
3- Department of Economics, Islamic Azad University, Isfahan (Khorasgan) Branch, Isfahan, Iran
4- Department of Economics, Islamic Azad University, Ahvaz Branch, Ahvaz, Iran.
2- Department of Economics, Islamic Azad University, Isfahan (Khorasgan) Branch, Isfahan, Iran ,
3- Department of Economics, Islamic Azad University, Isfahan (Khorasgan) Branch, Isfahan, Iran
4- Department of Economics, Islamic Azad University, Ahvaz Branch, Ahvaz, Iran.
Abstract: (3488 Views)
One of the important economic variables related to the foreign balance of countries is the current account balance of payments. Current account balance and budget balance are considered as important indicators of macroeconomic stability and welfare. The growing disequilibrium of the current account balance and the government budget balance lead to a macroeconomic imbalance. This paper analyzes the effects of monetary and fiscal policies on current account deficits in selected oil-exporting countries (Algeria, Colombia, Ecuador, Gabon, Iran, Mexico, Nigeria, Saudi Arabia, Kuwait, Angola, Congo, Indonesia, Malaysia, Trinidad, and Tobago) for the period 2000-2015 using a Panel Vector Autoregressive (P-VAR) model. The results indicate that monetary policy (by raising interest rates) will decrease the current account deficit. Considering that, in this research budget deficit coefficient is positive, as budget deficit increases (fiscal policy), the current account deficit decreases. In other words, the twin divergence hypothesis is approved for this group of countries, during the period under review. With increasing oil revenues, current account deficits will increase.
Type of Study: Research |
Subject:
business and international finance
Received: Dec 07 2018 | Accepted: Dec 31 2019 | ePublished: Aug 10 2020
Received: Dec 07 2018 | Accepted: Dec 31 2019 | ePublished: Aug 10 2020
References
1. Abrigo, M. R., & Love, I. (2016). Estimation of Panel Vector Autoregression in Stata. The Stata Journal, 16(3), 778-804. [DOI:10.1177/1536867X1601600314]
2. Algieri, B. (2013). An Empirical Analysis of the Nexus between External Balance and Government Budget Balance: The Case of the GIIPS Countries, Economic Systems, 37(2): 233-253. [DOI:10.1016/j.ecosys.2012.11.002]
3. Baharumshah, A. Z., Lau, E., & Khalid, A. M. (2006). Testing Twin Deficits Hypothesis Using VARs and Variance Decomposition. Journal of the Asia Pacific Economy, 11(3), 331-354. [DOI:10.1080/13547860600764245]
4. Barro, R. J. (1974). Are Government Bonds Net Wealth? Journal of Political Economy, 82(6), 1095-1117. [DOI:10.1086/260266]
5. Bartolini, L., & Lahiri, A. (2006). Twin Deficits, Twenty Years Later. Current Issues in Economics and Finance, 12(7), 1-7.
6. Chunming, Y., & Ruo, C. (2015). Policy Transmissions, External Imbalances, and Their Impacts: Cross-Country Evidence from BRICS. China Economic Review, 33(1), 1-24. [DOI:10.1016/j.chieco.2014.12.006]
7. Faust, J., & Leeper, E. M. (1997). When Do Long-Run Identifying Restrictions Give Reliable Results? Journal of Business & Economic Statistics, 15(3), 345-353. [DOI:10.1080/07350015.1997.10524712]
8. Hamilton, J. D. (1994). Time Series Analysis (Vol. 2): Princeton New Jersey. [DOI:10.1515/9780691218632]
9. Holtz-Eakin, D., Newey, W., & Rosen, H. S. (1988). Estimating Vector Autoregressions with Panel Data. Econometrica: Journal of the Econometric Society, 56(6), 1371-1395. [DOI:10.2307/1913103]
10. Kalou, S., & Paleologou, S.-M. (2012). The Twin Deficits Hypothesis: Revisiting an EMU Country. Journal of Policy Modeling, 34(2), 230-241. [DOI:10.1016/j.jpolmod.2011.06.002]
11. Kim, S., & Roubini, N. (2008). Twin Deficit or Twin Divergence? Fiscal Policy, Current Account, and Real Exchange Rate in the US. Journal of International Economics, 74(2), 362-383. [DOI:10.1016/j.jinteco.2007.05.012]
12. Lau, E., & Baharumshah, A. Z. (2006). Twin Deficits Hypothesis in SEACEN Countries: A Panel Data Analysis of Relationships between Public Budget and Current Account Deficits. Applied Econometrics and International Development, 6(2), 213-226.
13. Litsios, I., & Pilbeam, K. (2017). An Empirical Analysis of the Nexus between Investment, Fiscal Balances and Current Account Balances in Greece, Portugal and Spain. Economic Modelling, 63(1), 143-152. [DOI:10.1016/j.econmod.2017.02.003]
14. Lütkepohl, H. (2005). New Introduction to Multiple Time Series Analysis: Springer Science & Business Media. [DOI:10.1007/978-3-540-27752-1]
15. Neaime, S. (2015). Twin Deficits and the Sustainability of Public Debt and Exchange Rate Policies in Lebanon. Research in International Business and Finance, 33(1), 127-143. [DOI:10.1016/j.ribaf.2014.09.004]
16. Papadogonas, T., & Stournaras, Y. (2006). Twin Deficits and Financial Integration in EU Member-States. Journal of Policy Modeling, 28(5), 595-602. [DOI:10.1016/j.jpolmod.2006.02.002]
17. Vamvoukas, G. A. (1999). The Twin Deficits Phenomenon: Evidence from Greece. Applied Economics, 31(9), 1093-1100. [DOI:10.1080/000368499323571]
18. Xie, Z., & Chen, S.-W. (2014). Untangling the Causal Relationship between Government Budget and Current Account Deficits in OECD Countries: Evidence from Bootstrap Panel Granger Causality. International Review of Economics & Finance, 31(1), 95-104. [DOI:10.1016/j.iref.2014.01.014]
| Rights and permissions | |
.jpg) |
This work is licensed under a Creative Commons Attribution 4.0 International License. |
