Twin deficits threat in the European Union

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Show simple item record Siničáková, Marianna Sulikova, Veronika Gavurová, Beáta
dc.contributor.other Ekonomická fakulta cs 2017-03-21 2017-03-21 2017-03-15
dc.identifier.issn 1212-3609
dc.description.abstract The aim of the contribution was to identify presence and contagion threat of twin deficits, i.e. simultaneous budget and current account deficit in the EU countries. Using correlations and Granger causality testing we recorded existence of twin deficits in most of EU countries. In several countries we confirmed traditional causality that budget deficit implies current account deficit. In several other countries the opposite, known as current account targeting, was true. In two counties (Spain and Hungary) bi-causality was detected. We consider existence of bi-causality as the most complicated situation in practice. Then it is a real vicious cycle. Policy makers must target both imbalances at the same time, to solve this problem, which can be very difficult. Persistent macroeconomic problems in these two countries confirm our assumption.Our paper extends existing literature by determination of two thresholds for public debt-to-GDP which modify occurrence and risk of twin deficits in the EU countries. These break points were identified via threshold panel data model. Twin deficits problems are not probable for countries with public debt-to-GDP lower than 30.668%. However, risk of this phenomenon is much higher if public debt is from 30.688% to 98.126%. Countries with public debt over 98.126% suffer from high and persistent twin imbalances. Therefore we suggest reconsideration of Maastricht criterion on public debt and its reduction to 30%. Finally we observe contagion effect of twin deficits throughout EU countries regardless their economic performance or the euro area membership which is indirectly triggered also in the case of non-euro area members. en
dc.format text
dc.format.extent 144-156 s. cs
dc.language.iso en
dc.publisher Technická Univerzita v Liberci cs
dc.publisher Technical university of Liberec, Czech Republic en
dc.relation.ispartof Ekonomie a Management cs
dc.relation.ispartof Economics and Management en
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dc.rights CC BY-NC
dc.subject imbalances en
dc.subject twin deficits en
dc.subject current account en
dc.subject budget balance en
dc.subject threshold en
dc.subject.classification G34
dc.subject.classification M12
dc.title Twin deficits threat in the European Union en
dc.type Article en
dc.publisher.abbreviation TUL
dc.relation.isrefereed true
dc.identifier.doi 10.15240/tul/001/2017-1-010
dc.identifier.eissn 2336-5604
local.relation.volume 20
local.relation.issue 1
local.relation.abbreviation E&M en
local.relation.abbreviation E+M cs
local.faculty Faculty of Economics
local.citation.spage 144
local.citation.epage 156
local.access open
local.fulltext yes

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