Does Fiscal Policy Matter for the Trade Account? A Panel Cointegration Study

33 Pages Posted: 22 May 2006

See all articles by Katja Funke

Katja Funke

WHU - Otto Beisheim School of Management; International Monetary Fund (IMF)

Christiane Nickel

European Central Bank (ECB)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2006

Abstract

This paper analyses the empirical relationship between fiscal policy and the trade account. Research prior to this paper did not consider that the components of private and public demand in the import demand equation exhibit different elasticities. Using pooled mean group estimation for annual panel data of the G7 countries for the years 1970 through 2002, we provide empirical evidence that the composition of overall demand - i.e. the distribution among public demand, private demand and export demand - has an impact on the magnitude of the trade account deficit.

Keywords: Fiscal policy, trade account, trade elasticities, panel cointegration

JEL Classification: F32, E62, F41

Suggested Citation

Funke, Katja and Funke, Katja and Nickel, Christiane, Does Fiscal Policy Matter for the Trade Account? A Panel Cointegration Study (May 2006). ECB Working Paper No. 620, Available at SSRN: https://ssrn.com/abstract=899262 or http://dx.doi.org/10.2139/ssrn.899262

Katja Funke (Contact Author)

WHU - Otto Beisheim School of Management ( email )

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International Monetary Fund (IMF) ( email )

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Christiane Nickel

European Central Bank (ECB) ( email )

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Frankfurt am Main, 60314
Germany

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