Aristovnik, Aleksander and Djurić, Sandra (2010): Twin deficits and the Feldstein-Horioka puzzle: a comparison of the EU member states and candidate countries.
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The paper’s main objective is to investigate the empirical link between the fiscal balance and the current account (i.e. the twin deficits phenomenon). The paper focuses on the EU member states and candidate countries which are according to their different (e.g. historical, political, economical and geographical) characteristics divided into two major groups, i.e. old EU member states (EU15) and new EU member states and candidate countries (EU12+3) in the 1995-2008 period. Additionally, the importance of the so-called Feldstein-Horioka puzzle in the considered countries is examined in order to draw some conclusions about the regions’ integration with international capital markets. The empirical results suggest that budget deficits in the EU member states and candidate countries have generally signaled relatively high level of substitutability between private and public savings, implying a relatively low correlation between fiscal and external imbalances. Thus, the empirical results in general reject the validity of the twin deficit hypothesis. Finally, the paper provides evidence of a relatively higher level of capital mobility, especially in the EU12+3 region in the second sub-period (2004-2008).
|Item Type:||MPRA Paper|
|Original Title:||Twin deficits and the Feldstein-Horioka puzzle: a comparison of the EU member states and candidate countries|
|Keywords:||twin deficits, Feldstein-Horioka puzzle, capital mobility, EU member states, candidate countries, panel data analysis|
|Subjects:||F - International Economics > F1 - Trade > F15 - Economic Integration
F - International Economics > F3 - International Finance > F32 - Current Account Adjustment; Short-Term Capital Movements
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C33 - Models with Panel Data; Longitudinal Data; Spatial Time Series
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O52 - Europe
|Depositing User:||Aleksander Aristovnik|
|Date Deposited:||30. Jul 2010 08:58|
|Last Modified:||11. Feb 2013 18:17|
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