Twin Deficits Through the Looking Glass: Time-Varying Analysis in the Euro Area

The Effects of Monetary Policy Surprises and Fiscal Sustainability Regimes in the Euro Area

“…where 𝑠 𝑡 is the primary budget balance, 𝑏 𝑡−4 is the lagged public debt, both variables as a percentage of GDP, while the 𝑜𝑢𝑡𝑝𝑢𝑡𝑔𝑎𝑝 𝑡−4 is the output gap computed by the Hodrick-Prescott filter. 8 We take four lags for debt and output gap because the variables are annualized quarterly data 9 . We discriminate the periods based on the average of the 𝛿 coefficients, which indicate the magnitude of fiscal sustainability.…”

“…We compute it choosing 1600 as the lamda for the HP filter. We divide the cyclical component on its trend, and we multiply by 100 9. We need to annualize quarterly data for flow variables, namely primary balance and GDP.…”

Fiscal and current account imbalances: The cases of Germany and Portugal

“…The fixed effects model allows verifying the Twin Deficit Hypothesis, notwithstanding, the system generalised method of moments allows to partially corroborate the Ricardian Equivalence Hypothesis, in the presence of a fiscal rules index. In turn, Afonso and Coelho (2022b) study this topic for Eurozone countries between 1995 and 2020, considering both the cyclically adjusted primary budget balance (CAPB) and the total budget balance. On the one hand, the Twin Deficit Hypothesis is confirmed by the fixed effects estimates with Driscoll and Kraay (1998) robust standard errors.…”

The macroeconomic determinants and consequences of household financial behavior

“…pected to have higher national saving rates. Some studies (Afonso & Coelho, 2023;Furceri & Zdzienicka, 2020;Obstfeld & Rogoff, 2009) report a positive relationship between fiscal balances and trade balances.…”