2012年-IMF国际货币组织全球_Fiscal_Policy_and_the_Current_Account_Are_Microstates_Different__27页_1mb

Summary of "Fiscal Policy and the Current Account: Are Microstates Different?"

Core Content

This paper investigates the relationship between fiscal policy and the current account, with a specific focus on microstates—defined as countries with a population of less than 2 million between 1970 and 2009. It uses panel regression and panel vector autoregression (VAR) to analyze how fiscal adjustments affect the current account balance, comparing microstates with the global sample.

The study highlights the unique economic characteristics of microstates, which include:

• Small domestic markets that limit economies of scale and the development of indigenous technologies.
• High degree of openness to trade, which increases the proportion of imports in domestic consumption.
• Narrow range of exports and export markets, making them vulnerable to external shocks.
• High transport costs and lumpy investment, increasing the volatility of the current account.
• Large public sector relative to GDP, often biased toward non-tradables, contributing to structural current account vulnerabilities.

Main Findings

Panel Regression Results

• A percentage point improvement in the fiscal balance improves the current account balance by 0.4 percentage points of GDP in microstates (compared to 0.34 in the global sample).
• The real effective exchange rate (REER) has no significant impact on the current account in microstates, unlike in the global sample.
• Trade openness is negatively correlated with the current account balance, as higher openness leads to more imports.
• Lagged net foreign assets (NFA) to GDP ratio has a positive effect, possibly due to higher net income flows.
• Terms of trade volatility is positively associated with the current account balance, as agents may save more for precautionary reasons.
• Lagged log of real effective exchange rate is negatively related to the current account balance.

Panel VAR Results

• An increase in government consumption leads to real exchange appreciation.
• In microstates, the negative impact on the current account after an initial deterioration dies out faster than in the global sample.
• This suggests that fiscal policy in microstates has limited effect on the current account beyond its direct impact on imports.
• The weak relative price effects in microstates make fiscal adjustment more difficult in influencing the current account.

Key Information

• The Ricardian equivalence principle is challenged in the empirical analysis, as fiscal adjustments do not fully offset private sector behavior.
• The conventional approach to measuring fiscal policy is used due to the difficulty in constructing exogenous fiscal policy measures from historical records in microstates.
• The recursive approach is applied to identify government spending shocks, as the narrative approach is less feasible in a large sample.
• Microstates are more likely to experience large current account adjustments if they have large current account deficits, budget surpluses, or are less open.
• Government consumption in microstates leads to real exchange appreciation, but the effect on the current account is shorter-lived compared to the global sample.

Implications

The findings suggest that fiscal policy has limited influence on the current account in microstates, primarily due to:

• Weak relative price effects, which reduce the ability of fiscal adjustments to influence trade balances.
• High trade openness, leading to a stronger direct link between fiscal policy and imports.
• Structural vulnerabilities such as small domestic markets and reliance on a narrow set of exports and export markets.

These characteristics imply that fiscal adjustments in microstates are less effective in improving the current account, and that external shocks have a more pronounced impact due to their limited economic diversification and market size.

Methodology

• The paper uses panel regression and panel VAR to estimate the impact of fiscal policy on the current account.
• Data sources include the World Economic Outlook (WEO), World Development Indicators (WDI), and the Lane and Milesi-Ferretti (2007) database for net foreign assets.
• The sample includes 155 countries, of which 42 are microstates.

Conclusion

The results imply that fiscal policy adjustments in microstates have limited effectiveness in influencing the current account beyond their direct impact on imports. The weak relative price effects and high trade openness make the current account more sensitive to external factors, and thus, fiscal adjustment is more challenging in these economies. The study also emphasizes the importance of understanding the unique characteristics of microstates when analyzing fiscal and current account dynamics.