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The US “Twin Deficits”: A Reappraisal

Published online by Cambridge University Press:  17 August 2016

Thepthida Sopraseuth
Thepthida Sopraseuth*
Affiliation:
EUREQua-University of Paris I Panthéon-Sorbonne
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Résumé

Une importante littérature empirique a analysé, depuis le milieu des années 80, la relation entre les déficits budgétaires et commerciaux des Etats-Unis, sans jamais atteindre un consensus. Deux éléments peu-vent être pris en compte pour expliquer ces résultats contradictoires. La comparaison des données à niveau par rapport aux données stationnarisées a un impact sur les conclusions. On remarque, à côté de cela, que le lien entre les exportations nettes et le solde budgétaire des Etats-Unis, stationnarisés ou non, est instable. Ce manque de robustesse peut venir de changements dans la contribution relative des chocs de demande et d’oñre dans l’économie américaine : les chocs de demande génèrent généralement une corrélation positive entre les déficits commerciaux et fiscaux, tandis que les chocs d’offre impliquent une corrélation négative entre les deux séries. Afín de contrôler la relevance empirique de cette intuition, nous avons employé un modèle RBC standard. Avec différents taux estimés de volatilité des chocs d’offre et de demande, le modèle répond aux changements de corrélation entre la balance commerciale et fiscale des Etats-Unis pour chaque sous-exemple, exceptés les années 90.

Summary

Summary

Since the mid-1980s, an extensive empirical literature has investigated the relationship between the US fiscal and trade deficits without reaching any consensus. Two elements may account for these conflicting results. First, considering data in levels versus stationarized data has an impact on conclusions. Moreover, the link between the US net exports and government balance, whether stationarized or not, is unsteady. This lack of robustness may stem from changes in the relative contribution of demand and supply shocks in the US economy: demand shocks generate a positive correlation between trade and fiscal deficits while supply shocks imply a negative relationship between both series. In order to check the empirical relevance of this intuition, I use a standard Real Business Cycle model. With varying estimated volatility ratios of supply and demand shocks, the model succeeds in matching the switching magnitude of the correlation between the US balance of trade and fiscal deficits over each sub-sample except the 1990s.

Keywords

F32F41F32F41
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 65 , Issue 2 , 1999 , pp. 139 - 178
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1999 

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Footnotes

(*)

I benefited from discussions with P-Y Hénin, F. Boissay and M. Carré. I am grateful to the two anonymous referees for their helpful comments. I am also indebted to J-O Hairault for valuable suggestions and support. Mistakes and omissions are, of course, mine.

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