Are IMF Stabilization Programs in the European Union Disastrous?

2020 ◽  
pp. 1-21
Author(s):  
Pantelis C. Kostis
Keyword(s):  
European Union ◽  
Current Account ◽  
Current Account Deficit ◽  
Economic Recession ◽  
The European Union ◽  
Long Run ◽  
Gdp Growth Rate ◽  
Time Period ◽  
Short Run ◽  
Binary Logistic Model

This chapter examines the effectiveness of Stabilizing Programs in the European Union for the time period from the Maastricht Treaty in 1993 to 2013 (the recent bailouts of Greece, Ireland, and Portugal). A binary logistic model is used which specifies binomial as the distribution and logit as the link function, using an unbalanced panel of annual data. Two main conclusions emerge: a) the probabilities of an economic recession, a high debt to GDP ratio, and a high current account deficit to GDP ratio, are greater when a Stabilization Program is adopted than without one, and b) a Stabilization Program has a negative short-run effect on the GDP growth rate, as well as negative long-run effects (8 years after the adoption) on the debt to GDP ratio and the current account deficit to GDP ratio.

scholarly journals The Relationship between Current Account Deficits and Growth in Montenegro: ARDL Bounds Testing Approach

2018 ◽  
Vol 7 (3) ◽  
pp. 5-24 ◽  
Author(s):  
Mustafa Özer ◽  
Jovana Žugić ◽  
Sonja Tomaš-Miskin
Keyword(s):  
Growth Rate ◽  
Current Account ◽  
Current Account Deficit ◽  
Gdp Growth ◽  
Bounds Testing ◽  
Current Account Deficits ◽  
Long Run ◽  
Gdp Growth Rate ◽  
Short Run ◽  
The Relationship

Abstract In this study, we investigate the relationship between current account deficits and growth in Montenegro by applying the bounds testing (ARDL) approach to co-integration for the period from the third quarter of 2011 to the last quarter of 2016. The bounds tests suggest that the variables of interest are bound together in the long run when growth is the dependent variable. The results also confirm a bidirectional long run and short run causal relationship between current account deficits and growth. The short run results mostly indicate a negative relationship between changes in the current account deficit GDP ratio and the GDP growth rate. This means that any increase of the value of independent variable (current account deficit GDP ratio) will result in decrease of the rate of GDP growth and vice versa. The long-run effect of the current account deficit to GDP ratio on GDP growth is positive. The constant (β0) is positive but also the (β1), meaning that with the increase of CAD GDP ratio of 1 measuring unit, the GDP growth rate would grow by 0,5459. This positive and tight correlation could be explained by overlapping structure of the constituents of CAD and the drivers of GDP growth (such as tourism, energy sector, agriculture etc.). The results offer new perspectives and insights for new policy aiming for sustainable economic growth of Montenegro.

scholarly journals The effect of fiscal deficits on the external imbalances in the European Union

2020 ◽  
pp. 17-17
Author(s):  
Kosta Josifidis ◽  
Dragutinovic Mitrovic ◽  
Sladjana Bodor
Keyword(s):  
European Union ◽  
Current Account ◽  
Current Account Deficit ◽  
Fiscal Deficit ◽  
The European Union ◽  
External Imbalances ◽  
Econometric Methods ◽  
Long Run ◽  
The Impact ◽  
The Current Account

This paper analyzes the effect of the fiscal deficit on the current account deficit in the European Union during the period 1995-2018. The purpose is to examine to what extent an increase in government spending affects the deterioration of terms of trade and contributes to increasing external imbalances. Econometric methods for heterogeneous panel data models are used to analyse the existence of a long-run relationship between the fiscal deficit and the current account. The empirical findings indicate that the twin deficits hypothesis is not confirmed for the whole European Union, but only for a certain number of member states, where a long-run relationship still exists, confirming the impact of the fiscal deficit on the current account.

scholarly journals Determinants of Current Account Balance in Six ASEAN Countries: A Panel Analysis Approach

2019 ◽  
Vol 11 (7) ◽  
pp. 129
Author(s):  
Soo Xin Lin ◽  
Jerome Kueh
Keyword(s):  
Current Account ◽  
Panel Cointegration ◽  
Current Account Balance ◽  
Vector Error Correction ◽  
Long Run ◽  
Time Period ◽  
Fiscal Balance ◽  
Short Run ◽  
Asean Countries ◽  
Age Dependency Ratio

This paper aims to examine the potential determinants of current account balance, which has been an interesting research topic in analysis over the decade. The relationship between current account balance and several different variables, such as fiscal balance, public debt, real GDP, and age dependency ratio for old and young, are examined. In this paper, the selected time period is from 1990 to 2016, in order to include the financial crisis period in six ASEAN countries (Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam). To this end, the research is based on the estimation of panel unit root, panel cointegration, panel Vector Error-Correction Model (VECM) and panel Granger causality. The findings show that all variables are cointegrated in the long-run and there are also unidirectional and bidirectional causal relationships in the short-run.

scholarly journals Public Debt, Current Account Deficit and Economic Growth: A Study on Indian Context

2020 ◽  
Vol 9 (3) ◽  
pp. 594-601
Keyword(s):  
Economic Growth ◽  
Current Account ◽  
Public Debt ◽  
Current Account Deficit ◽  
External Debt ◽  
Series Data ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
Internal Debt

External debt and internal debt form main components of the public debt structure in India. India’s debt profile shows increasing external debt and simultaneously increasing the deficit in current account which have impact on economic growth of India. Our study assesses the impact of India’s Gross External Debt (GED), Internal Debt (IND) and Current Account Deficit (CAD) on economic growth (GDP) by using time series data from 1998-99 to 2018-19. We intend to find long-run as well as short run relationship between the variables with the help of Eviews software. Stationarity of data is tested by considering Augmented Dickey-Fuller (ADF) test statistics and used Johansen Co-integration test and Vector Error Correction Model (VECM). The result shows co-integration among the variables with one equation. The result of VECM shows existence of long-run relationship among the variables. But the study fails to find the short-run causality among the variables. The results show external debt (GED), internal debt (IND), and Current Account Deficit (CAD) have negative and statistically insignificant relationship with GDP. It shows increase in public debt and deficit in current account results in decrease in GDP growth.

scholarly journals Testing the Twin Deficit Hypothesis: Evidence from the Republic of North Macedonia

2020 ◽  
Vol 11 (3) ◽  
pp. 45-62
Author(s):  
Vesna Bucevska
Keyword(s):  
Current Account ◽  
Budget Deficit ◽  
Current Account Deficit ◽  
Point Of View ◽  
Special Importance ◽  
The European Union ◽  
Vector Autoregressive ◽  
Long Run ◽  
The Republic ◽  
The Current Account

AbstractBackgroundAn 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.ObjectivesThe objective of this paper is to test empirically the validity of the twin deficit hypothesis in the Republic of North Macedonia.Methods/ApproachTo achieve this objective, we used actual quarterly data on Macedonia's budget and the current account deficit in the period from the first quarter of 2005 until the fourth quarter of 2017 and applied several econometrics methods: the Granger causality, a vector autoregressive (VAR) and a vector error correction model (VECM).ResultsThese findings point to the conclusion that efforts focused on improving the current account imbalances through fiscal policy will be inefficient in the short run.ConclusionsHowever, the existence of a long run relationship between the budget deficit and the current account deficit indicates the necessity of policy initiatives focused not only on reducing the budget deficit, but also on improving the external position of the country though export promotion.

scholarly journals A cross-sectoral analysis of the relation between labor productivity and labor compensation in the European Union

2021 ◽  
Vol 62 ◽  
pp. 54-65
Author(s):  
A.D. Fofack ◽  
◽  
S.D. Temkeng ◽  
Keyword(s):  
European Union ◽  
Labor Productivity ◽  
Fixed Effects ◽  
The European Union ◽  
Labor Compensation ◽  
Pooled Mean Group ◽  
Long Run ◽  
Short Run ◽  
The Mean ◽  
Productivity Gains

The aim of this paper is to assess and compare the link between labor productivity and compensation in four industries — air transport, electronics, finance, and telecommunications — of twenty‐five member states of the European Union (EU) from 2000 to 2014. The long‐run and short‐run dynamics of productivity and compensation are analyzed using the pooled mean group (PMG), the mean group (MG) and the dynamic fixed effects (DFE) estimators. The results confirm the existence of a gap between productivity and compensation in each of those industries as mentioned in previous studies. However, the results show that despite that gap, the link between the two variables is not broken. That is, productivity and compensation are not only linked in the long run, but they also return to their long‐run equilibrium after every short‐run disturbance. The econometric analysis also reveals that the relation between productivity and compensation does not follow a significantly different pattern from one industry to the other. These findings robust to alternative models, estimation techniques and across industries, suggest that there are some other cross‐sectoral factors preventing productivity gains to be fully reflected on paychecks.

scholarly journals An Empirical Analysis on the Relationship between Health Care Expenditures and Economic Growth in the European Union Countries

2018 ◽  
Vol 2 (1) ◽  
pp. 12
Author(s):  
Çiğdem Börke Tunalı ◽  
Naci Tolga Saruç
Keyword(s):  
Economic Growth ◽  
European Union ◽  
Health Expenditure ◽  
Gdp Per Capita ◽  
The European Union ◽  
Long Run ◽  
European Union Countries ◽  
Short Run ◽  
Per Capita ◽  
The Relationship

This paper empirically investigates the relationship between health expenditure and economic growth in the European Union countries over the period 1995-2014. By using the Dumitrescu-Hurlin Test (Dumitrescu and Hurlin, 2012) which is developed to test Granger causality in panel datasets (Lopez and Weber, 2017), it is found that there is a unidirectional relationship between these variables and gross domestic product (GDP) per capita Granger causes health expenditure per capita. After determining the direction of the relationship between health expenditure per capita and GDP per capita we estimate the short run and the long run effects of GDP per capita on health expenditure per capita by using Mean Group (MG) and Pooled Mean Group (PMG) estimators which are developed by Pesaran and Smith (1995) and Pesaran, Shin and Smith (1999) respectively. According to the estimation results, GDP per capita has a positive effect on health expenditure per capita both in the short run and the long run.

scholarly journals CURRENT ACCOUNT BALANCE, INFLATION, INDUSTRY AND SUSTAINABLE DEVELOPMENT IN JORDAN

2017 ◽  
Vol 26 (3) ◽  
pp. 45-56
Author(s):  
Mohammad ALAWIN ◽  
Mohammad OQAILY
Keyword(s):  
Sustainable Development ◽  
Current Account ◽  
Economic Model ◽  
Current Account Deficit ◽  
Current Account Balance ◽  
Long Run ◽  
Short Run ◽  
Domestic Inflation

In order to achieve that goal, the study presents theoretical and econometricframework for an economic model that includes the determinants of inflation wherecurrent account deficit is one of them. The study finds out that the increase in currentaccount deficit affects domestic inflation negatively in the long run. This result would beattributed to the fact that current account deficit absorbs big part of the excess in thedomestic demand, in addition to the long run flexibility of the economy to producesubstitutes for imported goods. However, in the short run, it was found that currentaccount deficit affects domestic inflation positively. It was found that for this period thereis no enough flexibility for the Jordanian economy to produce enough goods to substituteimports, which leads to inflation.

scholarly journals An Empirical Analysis on the Relationship between Health Care Expenditures and Economic Growth in the European Union Countries

2021 ◽  
Vol 4 (2) ◽  
pp. 11
Author(s):  
Çiğdem Börke Tunalı ◽  
Naci Tolga Saruç
Keyword(s):  
Economic Growth ◽  
European Union ◽  
Health Expenditure ◽  
Gdp Per Capita ◽  
The European Union ◽  
Long Run ◽  
European Union Countries ◽  
Short Run ◽  
Per Capita ◽  
The Relationship

This paper empirically investigates the relationship between health expenditure and economic growth in the European Union countries over the period 1995-2014. By using the Dumitrescu-Hurlin Test (Dumitrescu and Hurlin, 2012) which is developed to test Granger causality in panel datasets (Lopez and Weber, 2017), it is found that there is a unidirectional relationship between these variables and gross domestic product (GDP) per capita Granger causes health expenditure per capita. After determining the direction of the relationship between health expenditure per capita and GDP per capita we estimate the short run and the long run effects of GDP per capita on health expenditure per capita by using Mean Group (MG) and Pooled Mean Group (PMG) estimators which are developed by Pesaran and Smith (1995) and Pesaran, Shin and Smith (1999) respectively. According to the estimation results, GDP per capita has a positive effect on health expenditure per capita both in the short run and the long run.

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