144 2017, XX, 1
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DOI: 10.15240/ ul/001/2017-1-010
In oduc ion
In he 1980´s he US economy was ma ked by
un il hen a he unusual ex e nal and in e nal
de i ci s. Simila si ua ion g adually appea ed
in o he coun ies. Du ing las decade i was
analysed in he case o so called PIIGS coun ies
(Po ugal, I eland, I aly, G eece, and Spain)
in he Eu opean Union. This co-mo emen
d aws in e es o many esea che s. Gene ally
i is belie ed ha in e nal de i ci ( i scal budge
de i ci ) causes ex e nal one (ex e nal balance
de i ci ). Ex e nal balance de i ci is usually
measu ed ia ade o cu en accoun de i ci .
This phenomenon is called „ win de i ci “. Twin
de i ci p oblem can be pe cei ed as a icious
ci cle. High budge de i ci gene a es impo an
cu en accoun de i ci and his in u n leads
o highe budge de i ci . The e o e win de i ci
h ea should be in he cen e o a en ion o
policy make s.
While om 2000 o 2007 he e we e no
signi i can changes in public deb le el in
he EU coun ies on a e age (including new
membe s a es ha became he EU membe s
since 2004, 2007, and 2013), du ing nex se en
yea s om 2008 o 2014 public deb has isen
by 22% on a e age. Du ing he i s obse ed
pe iod e en PIIGS coun ies managed o
main ain hei public deb le el. In addi ion
Bulga ia succeeded o educe i s public deb
by 55%. Du ing he nex pe iod public deb has
isen signi i can ly mainly in he PIIGS coun ies
(by 56% on a e age) bu also in Slo enia
and C oa ia by 61% and 45% espec i ely.
Recommended alue o public deb s emming
om Maas ich c i e ia was o e s epped by
9 o 15 ou o 28 EU coun ies on a e age
(including la e EU membe s) du ing he i s o
second pe iod espec i ely. In e ms o a e age
budge de i ci du ing he i s pe iod 9 coun ies
exceeded alue o 3% o GDP ecommended
by Maas ich c i e ia. Th oughou nex pe iod,
3% le el o budge de i ci was iola ed in 20
coun ies.
Se e al au ho s, e.g. Cla ida e al. (2007),
ecommended 5% as a maximum h eshold
o cu en accoun de i ci o GDP. Highe
de i ci ep esen s acco ding o hem a dange
zone o a coun y. Lowe de i ci can be qui e
easily in medium and long e m compensa e
by cu en accoun su plus o by in es men s
and o he i ems o capi al accoun . Howe e ,
a de i ci o e 5% leads o ex e nal ins abili y
and o he nega i e impac s in a coun y. When
calcula ing a e age alue o cu en accoun
de i ci o GDP du ing pe iod om 2000 o 2014,
7 coun ies ou o 28 exceeded dange ous
poin o 5%. I was as expec ed mainly he
case o new EU membe s (Bulga ia, Cyp us,
Es onia, La ia, and Romania) and PIIGS
coun ies (G eece, Po ugal). While in he case
o public deb we could obse e wo sening o
si ua ion du ing las yea s, he opposi e was
ue as o cu en accoun de i ci . All coun ies
expe ienced imp o emen apa om Cyp us
wi h sligh ly deepening de i ci . This can be
explained by ecen i nancial and economic
c isis accompanied by gene al dec ease o
domes ic consump ion. So how i is wi h in e nal
and ex e nal indeb edness o imbalances in he
Eu opean Union?
Resul s di e among coun ies (Kalou
& Paleologou, 2011; Sipko, 2014). Nei he
hypo hesis o win de i ci phenomenon, no
hypo hesis on causali y ha in e nal de i ci
implies ex e nal one was con i med in all
coun ies. Consequen ly, i a coun y manages
o educe i s in e nal de i ci i does no ha e o
lead au oma ically o d op o ex e nal de i ci .
Addi ionally he e is a need o emembe abou
coun y and economy en i onmen s (Michalski,
2010). En i onmen o local speci i c economics
is no a simple sum o mic oeconomic in l uences
(Bem e al., 2015) bu should be conside ed wi h
TWIN DEFICITS THREAT
IN THE EUROPEAN UNION
Ma ianna Sinicako a, Ve onika Suliko a, Bea a Ga u o a
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expec ed in l uences on he esul s (Szczygiel e
al., 2015). E olu ion o exchange a es (Sipko,
2000), business en i onmen o small and
medium en e p ises (Belás & Sopko á, 2016;
Vi gle o á e al., 2016; Dub a ská e al., 2015;
Ključniko e al., 2016; Belás e al., 2015) and
o he ac o s can signi i can ly in l uence he
esul s.
Ne e heless, ambi ion o he pape
is o i nd ou i win de i ci s exis wi hin he
Eu opean Union consis ing o a ious a he
he e ogeneous economies. We assume ha
he ewe coun ies su e om he phenomenon
he be e si ua ion o he EU policy make s is.
Less p oblems wi h win de i ci s ac oss Eu ope
lead o lowe p obabili y o con agion e ec in
o he Eu opean coun ies. Though he aspec
o win de i ci s is much b oade . Ou pape
ex ends exis en li e a u e om a ious poin s
o iew.
Via se e al s eps we would like o iden i y
i) p esence o win de i ci s in pa icula coun ies
ii) di ec ion o hei causali y, iii) and a b eak
poin ( h eshold) om which ela ionship
be ween de i ci s may change. In addi ion, ou
pape conside s di e si y o s udied g oups
o coun ies. We compa e si ua ion in i) new
e sus old membe s a es, ii) ad anced and
eme ging o de eloping Eu opean coun ies
(acco ding o he In e na ional Mone a y Fund
classi i ca ion), iii) PIIGS and o he coun ies, i )
eu o a ea membe s and non-membe s.
Ou app oach enables us o speci y ex e nal
and i scal posi ion o esea ched coun ies.
We will de e mine in e ac ions o absence o
in e ac ions be ween a iables.
The pape is o ganised as i ollows. Sec ion
1 p esen s a heo e ical backg ound and
o e iew o ele an li e a u e in he i eld o win
de i ci s, in e nal and ex e nal imbalances, e c.
Sec ion 2 e iews da a applied in ou analysis.
Sec ion 3 depic s employed me hods. Sec ion
4 p o ides empi ical esul s and discussion
based on ou i ndings. The las sec ion b ings
he conclusions.
1. Theo e ical Backg ound
and Li e a u e
Li e a u e in he i eld o ela ionship be ween
cu en accoun de i ci and budge de i ci can
be di ided in o ou g oups. Resea ch on: i) he
win de i ci hypo hesis, ii) he cu en accoun
a ge ing hypo hesis, iii) he eedback linkage,
i ) and he in e - empo al Rica dian iew (see
Tab. 1).
The win de i ci hypo hesis claims ha
budge de i ci causes cu en accoun de i ci . In
o he wo ds, ising public expendi u es canno
be ully and immedia ely sa is i ed by domes ic
p oduc ion. Signi i can impo a ions o a coun y
a e equi ed and his will, ce e is pa ibus, lead
o cu en accoun de i ci . This phenomenon
has been cla i i ed ia wo possible app oaches:
a) he Mundell-Fleming heo y b) and he
Keynesian abso p ion heo y.
The Mundell-Fleming app oach s ems om
he ac ha a ise o budge de i ci implies
a g ow h in eal domes ic in e es a es.
Consequen ly, his leads o capi al in l ows and
exchange a es will app ecia e. The e o e,
impo a ions will be ela i ely cheape and
expo a ions will be less compe i i e. This
si ua ion will igge cu en accoun de i ci .
The Keynesian abso p ion heo y is based
on he p inciple ha a ise o he budge de i ci
gene a es a p essu e on domes ic consump ion
and abso p ion. This con ibu es o cu en
accoun de i ci .
i) win de i ci hypo hesis budge de i ci 
cu en accoun de i ci
Mundell-Fleming heo y
Keynesian abso p ion heo y
ii) cu en accoun a ge ing budge de i ci 
cu en accoun de i ci
iii) eedback linkage budge de i ci  
cu en accoun de i ci bidi ec ional causali y
i ) no linkage budge de i ci X
cu en accoun de i ci in e - empo al Rica dian iew
Sou ce: own
Tab. 1: Rela ionship be ween cu en accoun de i ci and budge de i ci
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Some au ho s (Islam, 1998; Sal a o e,
2006; Raul & A onso, 2009) ha e p o ed
impo an nexus be ween he wo de i ci s and
hei causali y om in e nal de i ci o ex e nal
one. They e i i ed assump ions o he Mundell-
Fleming and Keynesian heo ies.
On he o he hand se e al au ho s, e.g.
Ano uo and Ramchande (1998), Ma inhei o
(2008), and S igli z (2010), obse ed and
con i med e e sal ela ionship be ween
ex e nal and in e nal de i ci . This opposi e
ela ionship was named as ‘‘cu en accoun
a ge ing’’ by Summe s (1988). De e io a ion in
he cu en accoun will p obably cu b economic
g ow h, ax e enues will d op down and his
will aise budge de i ci , ce e is pa ibus.
O he esea che s con i med a bidi ec ional
causali y be ween in e nal and ex e nal de i ci s.
Felds ein and Ho ioka (1980) obse ed ha
in es men s and sa ings a e signi i can ly
co ela ed and his leads o bi-causali y be ween
he wo a iables. Simila empi ical i ndings a e
in he con ibu ion by Kalyoncu (2007).
Howe e , some au ho s did no i nd any
ela ion be ween he wo de i ci s. These esul s
a e in line wi h he Rica dian equi alence
hypo hesis. This hypo hesis pos ula es ha
budge and cu en accoun de i ci s a e no
in e dependen . I economic g ow h d ops,
go e nmen will p obably ealise i scal
measu emen s o in l uence sa ings and
in es men s, he e o e eal in e es a es,
exchange a es and cu en accoun does no
ha e o be changed (Ga cia & Ramajo, 2004;
Michalski, 2009).
Wi hin win de i ci s, some au ho s (Algie i,
2013) ha e been ecen ly ocusing on so
called PIIGS coun ies due o hei signi i can
indeb edness and p oblems in i nancial sec o .
Complex s udies comp ising win de i ci
analyses in la ge g oups o coun ies a e
a he sca ce. Many au ho s ocus on pa icula
economies o smalle g oups o coun ies.
The e o e we would like o ul i l he gap and
o analyse he Eu opean Union coun ies.
Mos o he au ho s apply G ange -causali y
es ing, panel da a, e o co ec ion model and
gene alized leas squa es es ima o s. Howe e ,
we belie e ha i is use ul o iden i y a b eak
poin a e which nexus be ween de i ci s can
be changed. Thus we will employ he h eshold
model o i nd his c i ical alue.
2. Da a
Ou analysis comp ehends 28 Eu opean
coun ies. The sample includes annual da a
om 2000 o 2014. We employed ei he
Eu os a o In e na ional Mone a y Fund
da abases eleased in 2015.
Simila ly o o he panel da a models o
win de i ci s (Chinn & P asad, 2003; Fo e &
Magazzino, 2013), cu en accoun balance (ca)
is a dependen a iable and budge balance (bb)
(budge de i ci ) is an independen a iable. The
public deb is de i ned as a h eshold a iable in
ou model, which enables us o de e mine he
ela ion be ween budge balance and cu en
accoun sepa a ely in se e al deb - o-GDP
in e als.
We include also con ol a iables which
explain he cu en accoun balance. Fi s ly, we
add an ou pu gap. Ou pu gap was calcula ed
as a di e ence be ween ac ual and po en ial
g oss domes ic p oduc (GDP). Po en ial GDP
was calcula ed using usual Hod ick-P esco
i l e . We expec ha an inc ease in ou pu
gap will de e io a e he cu en accoun . Then,
we add a eal e ec i e exchange a e, as an
impo an de e minan o cu en accoun
balance. Fu he , we ake in o accoun a ade
openness; i a ade openness inc eases, he
cu en accoun su plus is abou o g ow (as i
is shown by Nickel and Vans eenkis e (2008)).
Fu he , we add domes ic in es men s as an
inc ease in domes ic in es men leads o he
cu en accoun de i ci . Ano he con ol a iable
is in l a ion measu ed as annual a e o change
o using GDP de l a o . Rise o in l a ion should
con ibu e o inc ease o cu en accoun de i ci
and his in u n should lead o ising budge
de i ci i we assume cu en accoun a ge ing
hypo hesis (i.e. assump ion ha ex e nal
imbalance implies in e nal one).
Figu e 1 p o ides us wi h a ough o e iew
o wo main ime se ies; cu en accoun de i ci s
and budged de i ci . I app oxima ely cap u es
si ua ion in ou g oups o coun ies om 2000
o 2014: i) old ad anced EU membe s, ii) he
PIIGS EU membe s, iii) new ad anced EU
membe s, i ) and new eme ging membe s. I
seems ha bo h de i ci s did no appea in he
g oup o old ad anced EU membe s wi h he
excep ion o he Uni ed Kingdom. Howe e
simul aneous p esence o bo h imbalances
is mo e ob ious in h ee emaining g oups.
Ne e heless we will apply se e al me hods
o e i y ou win de i ci hypo hesis appa en
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bu no ce ain om Figu e 1. The employed
me hodology is desc ibed in chap e 3.
3. Me hodology
P esence o win de i ci phenomenon in he EU
coun ies is e i i ed using s anda d Pea son´s
co ela ions be ween wo p inciple a iables,
budge balance and cu en accoun . Howe e ,
we will conside ime lag, oo, as i is possible
ha budge balance de i ci o su plus can imply
cu en accoun de i ci o su plus and ice
e sa wi h a ce ain delay (Lascsáko á, 2016).
We choose a delay o one yea and hus we
pe o m c oss-co ela ions.
G adually we comple e ou esea ch using
G ange causali y es ing and panel da a
h eshold model.
3.1 G ange Causali y Tes ing
G ange causali y es ing will enable us o
de e mine di ec ion o causali y be ween
obse ed a iables. We will ocus on
ela ionship be ween budge balance (bb) and
cu en accoun balance (ca).
Null hypo hesis will suppose ha budge
balance does no G ange cause cu en
accoun balance. On he con a y, al e na i e
hypo hesis will be based on assump ion ha
budge balance does no G ange cause cu en
accoun . And we will es opposi e di ec ion,
oo, conside ing budge balance as dependen
and cu en accoun as independen a iable
(Lascsáko á, 2010).
G ange causali y es ing ypically deals
wi h lagged alues o a iables o ake in o
Fig. 1: Budge balance and cu en accoun (% o GDP) om 2000 o 2014
Sou ce: own ep esen a ion acco ding o he Eu os a (2015), In e na ional Mone a y Fund (2015)
No e: BE – Belgium, BG – Bulga ia, CZ – Czech Republic, DK – Denma k, DE – Ge many, EE – Es onia, IE – I eland,
EL – G eece, ES – Spain, FR – F ance, CR – C oa ia, IT – I aly, CY – Cyp us, LV – La ia, LT – Li huania, LU – Luxem-
bou g, HU – Hunga y, MT – Mal a, NL – Ne he lands, AU – Aus ia, PL – Poland, PT – Po ugal, RO – Romania, SL – Slo-
enia, SK – Slo akia, FI – Finland, SE – Sweden, UK – Uni ed Kingdom, PIIGS – Po ugal, I aly, I eland, G eece, Spain.
Classi i ca ion o coun ies as ad anced o eme ging ones is acco ding o he In e na ional Mone a y Fund.
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accoun delayed impac o independen
a iable on dependen one. Numbe o lags is
usually chosen acco ding o Schwa z o Akaike
in o ma ion c i e ion.
Howe e , G ange causali y es ing has i s
limi a ions. G ange causali y is no always ue
causali y. G ange es is designed o measu e
a nexus be ween wo a iables. Ne e heless,
in eali y a ela ionship can be implied by h ee
o mo e a iables (Toda & Yamamo o, 1995).
The e o e i seems app op ia e o e i y hese
causali ies using ec o au o eg ession o
panel da a model. Fu he , we will apply panel
da a h eshold model.
3.2 Panel Da a Th eshold
Hansen (1999) p oposed a panel da a h eshold
model wi h i xed e ec s. The model is de i ned in
he ollowing way:
yi = μi + β´
1 xi I(qi ≤ γ) +
+ β´
2 xi I(qi > γ)+ei
(1)
He e, he panel da a se is di ided in o wo
egimes, depending on he ac whe he he eal
alue o he h eshold a iable qi is highe o
smalle han he es ima ed h eshold (i.e. he
es ima ed alue o he h eshold a iable γ).
These wo egimes a e dis inguished by
di e en es ima ed eg ession coe i cien s
β1 and β2. Econome ic modelling gi es he
es ima ion o he eg ession coe i cien s β1, β2
and he es ima ion o he h eshold γ.
Double h eshold model (i.e. he model wi h
wo es ima ed h eshold alues o he h eshold
a iable) can be de i ned in he ollowing way:
yi = μi + β´
1 xi I(qi ≤ γ1 ) + β´
2 xi I(γ1 <
< qi ≤ γ2 )+β´
3 xi I(qi > γ2 ) + ei (2)
whe e he es ima ed h esholds γ1 < γ2 (Hansen,
1999).
3.3 Th eshold Model o Twin
Imbalances
We suppose ha he ela ion be ween cu en
accoun and budge balance depends on
he public deb - o-GDP a io. The e o e,
we de i ne a panel da a h eshold model o
win imbalances. We w i e di ec ly a double-
h eshold model, as u he es ima ion shows
ha one- h eshold model is no well speci i ed:
CAi = μi + β1BBi, –1I(DEBTi, –1 ≤ γ1 ) +
+ β2BBi, –1I(γ1 < DEBTi, –1 ≤ γ2 ) +
+ β3BBi, –1I(DEBTi, –1 > γ2 ) +
+ θ1GAPi, –1 + θ2REERi, –1 +
+ θ3OPENi, –1 + θ4INVi, –1 + ei
(3)
Whe e:
CAi is a cu en accoun balance (in % o
GDP).
BBi, –1 is a budge balance (in % o GDP).
DEBTi, –1 is a public deb (in % o GDP) –
a h eshold a iable.
GAPi, –1 is an ou pu gap (in % o po en ial
GDP).
REERi, –1 is a eal e ec i e exchange a e
(index).
OPENi, –1 is a ade openness (in % o GDP).
INVi, –1 a e p i a e in es men (in % o GDP).
In o de o a oid an endogenei y, each
independen a iable is lagged by one yea , as
i is ecommended by Baum e al. (2013).
4. Resul s and Discussion
A i s we pe o m co ela ions be ween wo
key a iables, i.e. cu en accoun and budge
balance o e eal a basic ela ion be ween hem.
S anda d co ela ions a e comple ed by c oss-
co ela ions aking in o accoun delayed impac
o s udied a iables. As s a ed p e iously,
coun ies a e di ided in o ou g oups: i) old
ad anced EU membe s, ii) PIIGS coun ies, iii)
new ad anced EU membe s, i ) new eme ging
EU membe s.
Table 2 displays ha ela ion be ween
in e nal and ex e nal (im)balances occu s in all
ou g oups o coun ies ega dless hei eu o
a ea membe ship. Howe e i is p esen in all
PIIGS coun ies.
P io o G ange causali y es ing we e i i ed
s a iona i y o ou da a by Augmen ed Dickey-
Fulle es and Kwia kowski-Phillips-Schmid -
Shin. As s a iona i y was con i med, we used
da a in hei le el alues.
Table 3 cap u es esul s o G ange
causali y es ing. Mo e o less e iden win
de i ci s a e in 15 ou o 28 coun ies. The
win de i ci phenomenon appea s in all ou
g oups ega dless hei eu o a ea membe ship.
Howe e , his p oblem occu s in all so called
PIIGS coun ies. We con i med adi ional win
de i ci hypo hesis based on assump ion ha
budged de i ci implies cu en accoun de i ci
in he case o he Ne he lands, G eece, I aly,
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Po ugal, Cyp us, Czech Republic, and C oa ia.
We iden i i ed opposi e causali y (so called
cu en accoun a ge ing) in six coun ies
(Belgium, Finland, F ance, I eland, Mal a, and
Romania). As o Finland ela ion be ween i s
in e nal and ex e nal balance is implied a he by
hei mu ual su pluses han de i ci s. Bi-causali y
can be obse ed in Spain and Hunga y. We
conside exis ence o bi-causali y as he mos
complica ed si ua ion. Then i is a eal icious
cycle. To sol e his p oblem, policy make s mus
a ge bo h imbalances a he same ime which
can be e y di i cul . Pe sis en mac oeconomic
p oblems in hese wo coun ies con i m ou
assump ion.
Consequen ly we es ima ed a model
wi h one h eshold; howe e he es ima ed
eg ession was no well speci i ed and he
es ima ed coe i cien s we e no s a is ically
signi i can . Finally we decided o es ima e
a model wi h wo h esholds (wi h h ee deb - o-
GDP in e als). Resul s a e cap u ed in Table 4.
The h eshold model es ima ed wo deb - o-
GDP h esholds: 30.688% and 98.126%. Public
deb he e o e di ided he ela ion be ween
cu en accoun and budge balance in o h ee
in e als: deb - o-GDP i) smalle han 30.688%;
ii) in he in e al om 30.688% o 98.126%, iii)
highe han 98.126%.
I public deb is in e io o 30.688%, he e
is a nega i e ela ion be ween budge balance
and cu en accoun – win de i ci s a e no
con i med. Howe e his i nding i s only o i e
coun ies ou o 28 analysed economies. I is
he case o Bulga ia, Es onia, La ia, Li huania,
and Luxembou g. While hei a e age gene al
g oss go e nmen deb measu ed o g oss
domes ic p oduc was only 15.76%, i was
76.94% on a e age in 23 o he Eu opean
coun ies h oughou all obse ed pe iod. While
Bal ic coun ies and Luxembou g main ained
s abilised and low public deb du ing whole ime
se ies, Bulga ia dec eased i s indeb edness
signi i can ly. Ini ial le el o i s public deb was
72.75% in 2000. In 2014 i was less han
27%. In addi ion absence o win de i ci s in
hose coun ies is impo an ad an age o
hei u he economic de elopmen . Du ing
he i s pe iod Bulga ia had budge su pluses
and cu en accoun de i ci s a he same ime.
Ne e heless in he ollowing pe iod, budge
de i ci s we e accompanied by a he balanced
o e en posi i e cu en accoun .
As o o he EU coun ies, hei public deb
has been almos always o e 30.688%. Ye ou
ou come indica es ha public deb a abou
30% and less could signi i can ly help o a oid
p oblems o win de i ci s in he EU coun ies.
This ac decidedly disc edi s Maas ich
c i e ion on public deb se on he oo “gene ous”
le el o 60% o GDP. A limi a ound 30% o EU
coun ies would be mo e a ional.
I public deb is in he in e al om 30.688%
o 98.126%, he e is a posi i e ela ion be ween
budge balance and cu en accoun – isk o
win de i ci s o lowe alues o win de i ci s
we e con i med. This is he case o mos o
esea ched EU coun ies wi h he excep ion o
Bulga ia, Luxembou g, and he Bal ic coun ies
belonging o he i s and G eece, I aly, and
Po ugal belonging o he las in e al. Though
Belgium, I eland, Spain, and pa ially also he
Uni ed Kingdom has been ecen ly app oaching
o he las in e al. App oxima ely, hal o he
coun ies om he second in e al mani es s
mo e o less se ious ma ks o he win de i ci
p oblem ega dless i s economic s a us and
single cu ency applica ion, i.e. old ad anced
membe s (Belgium, Finland, F ance, Uni ed
Kingdom); PIIGS membe s (I aly, Po ugal);
new ad anced membe s (Czech Republic,
Cyp us, Slo akia); and new eme ging membe s
(C oa ia, Hunga y, Romania). Finland appea s
he e also due o i s win su pluses du ing las
yea s. O he coun ies ace high isk o win
de i ci p oblems in he nea u u e as hei
public deb has isen signi i can ly du ing las
yea s (e.g. Slo enia).
I public deb is supe io o 98.126%, he e
is a posi i e ela ion be ween budge balance
and cu en accoun – high win de i ci s a e
con i med. In conclusion, we do no con i m
he alidi y o Rica dian equi alence unde
high public deb (mo e han 30%). Twin de i ci
hypo hesis has no been jus i i ed in he case o
low public deb (less han 30%). This hypo hesis
pos ula es independence be ween budge and
cu en accoun de i ci s. I economic g ow h
d ops, EU go e nmen s usually do no ealise
su i cien i scal measu emen s o in l uence
sa ings and in es men s o coun e balance
de i ci s. Twin de i ci s a e con i med also i deb -
o-GDP is impo an (i.e. highe han 98.126%).
Such a high alue o public deb does no
igge economic policy measu emen s in hose
coun ies su i cien ly o p e en he p oblem o
win de i ci s.
EM_1_2017.indd 149EM_1_2017.indd 149 13.3.2017 16:59:0513.3.2017 16:59:05
150 2017, XX, 1
Finance
Coun y Eu o a ea
membe
Co ela ions and c oss-co ela ions
CA ~ BB CA ~ BB -1 BB ~ CA -1
Old ad anced EU membe s a es
Aus ia AU € -0.253 -0.021 -0.485
Belgium BE € 0.705 0.514 0.719
Ge many DE € 0.287 0.125 0.178
Denma k DK -0.580 -0.888 -0.282
Finland FI € 0.845 0.835 0.812
F ance FR € 0.568 0.601 0.480
Luxembu g LU € -0.333 -0.075 -0.387
Ne he lands NL € -0.350 -0.657 0.129
Sweden SE 0.219 0.149 0.268
Uni ed Kingdom UK 0.409 0.322 0.630
Old so called “PIIGS” EU membe s a es
G eece EL € 0.318 0.727 0.119
Spain ES € 0.601 0.804 0.215
I eland IE € 0.180 0.419 0.210
I aly IT € 0.287 0.569 0.233
Po ugal PT € 0.686 0.183 0.244
New ad anced EU membe s a es1
Cyp us CY € 0.615 0.707 0.186
Czech Republic CZ 0.562 0.642 0.441
Es onia EE € -0.563 -0.707 -0.118
La ia LV € -0.675 -0.597 -0.207
Li huania LT € -0.481 -0.586 -0.081
Mal a MT € 0.153 0.142 -0.081
Slo enia SL € -0.705 -0.764 -0.402
Slo akia SK € 0.714 0.263 0.179
New eme ging and de eloping EU membe s a es1
Bulga ia BG -0.590 -0.675 -0.130
C oa ia CR 0.683 0.808 0.362
Hunga y HU 0.585 0.674 0.608
Poland PL -0.064 0.118 0.183
Romania RO 0.004 0.342 0.493
Sou ce: own
No e: Pea son´s co ela ions be ween cu en accoun and budge de i ci in ime . CA ~ BB -1 = c oss-co ela ions
be ween cu en accoun in ime and lagged budge de i ci in ime -1. BB ~ CA -1 = C oss-co ela ions be ween budge
de i ci in ime and lagged cu en accoun in ime -1. I Pea son´s coe i cien is om 0.6 o 1, i is high co ela ion ma ked
as ; i Pea son´s coe i cien is om 0.4 o 0.59, i is medium co ela ion ma ked as .
1 classi i ca ion acco ding o In e na ional Mone a y Fund
Tab. 2: Co ela ions and c oss-co ela ions be ween cu en accoun and budge
balance om 2000 o 2014
EM_1_2017.indd 150EM_1_2017.indd 150 13.3.2017 16:59:0513.3.2017 16:59:05
151
1, XX, 2017
Finance
Coun y Eu o a ea
membe
Causali y
CA ~ BB BB ~ CA
o de 1 o de 2 o de 1 o de 2
Old ad anced EU membe s a es
Aus ia AU € 0.699 0.717 0.123 0.104
Belgium BE € 0.945 0.802 0.054 · 0.205
Ge many DE € 0.537 0.349 0.111 0.523
Denma k DK 0.302 0.113 0.293 0.582
Finland FI € 0.184 0.381 0.133 0.013 *
F ance FR € 0.454 0.256 0.617 0.015 *
Luxembu g LU € 0.675 0.376 0.148 0.229
Ne he lands NL € 0.008 ** 0.152 0.112 0.238
Sweden SE 0.972 0.432 0.576 0.896
Uni ed Kingdom UK 0.673 0.283 0.348 0.350
Old so called “PIIGS” EU membe s a es
G eece EL € 0.051 · 0.006 ** 0.921 0.455
Spain ES € 0.008 ** 0.114 0.014 * 0.277
I eland IE € 0.142 0.708 0.097 · 0.019 *
I aly IT € 0.431 0.011 · 0.522 0.334
Po ugal PT € 0.136 0.052 · 0.370 0.948
New ad anced EU membe s a es1
Cyp us CY € 0.054 · 0.082 · 0.474 0.809
Czech Republic CZ 0.109 0.067 · 0.376 0.126
Es onia EE € 0.185 0.381 0.673 0.772
La ia LV € 0.315 0.757 0.114 0.147
Li huania LT € 0.179 0.270 0.123 0.147
Mal a MT € 0.693 0.491 0.649 0.078 ·
Slo enia SL € 0.165 0.132 0.333 0.575
Slo akia SK € 0.257 0.965 0.514 0.314
New eme ging and de eloping EU membe s a es1
Bulga ia BG 0.111 0.456 0.642 0.211
C oa ia CR 0.021 * 0.149 0.733 0.793
Hunga y HU 0.041 * 0.230 0.118 0.051 ·
Poland PL 0.507 0.653 0.319 0.221
Romania RO 0.165 0.239 0.000 *** 0.007 **
Sou ce: own
No e: BB = budge balance, CA = cu en accoun . O de 1 o 2 co esponds o one o wo lags espec i ely in ime se ies.
***=0.001, **=0.01, *=0.05, · =0.1 indica e 0.1%, 1%, 5%, 10% signi i cance le el. Signi i cance le el ***, ** and * is ma ked
as ; signi i cance le el · is ma ked as .
1 classi i ca ion acco ding o In e na ional Mone a y Fund
Tab. 3: G ange causali y es ing be ween cu en accoun de i ci and budge de i ci
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152 2017, XX, 1
Finance
Va iables Coe i cien s S anda d E o
BBi, -1 (DEBTi, -1 ≤ 30.688%) β1-0.652 *** 0.271
BBi, -1 (30.688% < DEBTi, -1 ≤ 98.126%) β2 0.145 *** 0.049
BBi, -1 (DEBTi, -1 > 98.126%) β3 0.443 *** 0.106
GAPi, -1 θ1-0.185 *** 0.070
REERi, -1 θ2 0.056 *** 0.022
OPENi, -1 θ3 0.055 *** 0.013
INVi, -1 θ4-0.605 *** 0.093
The es ima ed h esholds: 30.688 and 98.126
Sou ce: own
No e: Double- h eshold model; ***=0.001, **=0.01, *=0.05, · =0.1 indica e 0.1%, 1%, 5%, 10% signi i cance le el.
BB is budge balance, DEBT is public deb , GAP is ou pu gap, REER is eal e ec i e exchange a e, OPEN is openness,
INV – in es men .
Tab. 4: Th eshold model es ima ion; explained a iable: cu en accoun (in % o GDP)
Fig. 2: The pe cen age o coun ies co esponding o he pa icula public deb - o-GDP
egime
Sou ce: own
No e: pe cen age o coun ies wi h lowe public deb - o-GDP han 30.688%, wi h public deb - o-GDP be ween 30.688%
and 98.126% and wi h public deb - o GDP highe han 98.126% in a pa icula yea .
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