Twin deficit
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From a twin deficit (of English. Twin deficits ), sometimes by double deficit is spoken when a state both a fiscal deficit and a current account deficit has.
A current account deficit usually means that the respective economy imports more goods (goods and services) than it exports (if one ignores the other partial balances of the current account). Knapper: The economy produces less than it consumes. Normally, such a constellation causes the currency to lose value. In such a case the prices of domestic goods fall and can be offered cheaper in the rest of the world (abroad). Conversely, imported goods are proportionally more expensive. As a result, more domestic goods are in demand and the net exports of the respective national economy increase. This mechanism is used to balance the external contribution . However, since a change in price (due to the devaluation of the currency) is implemented more quickly than a change in the quantity of goods flows , the deficit initially worsens; in the long term, however, it should recover. Graphically, this effect would look like a J, which is why it is also known as the J-curve effect .
The budget deficit describes the state's debt burden as measured by GDP . If the state demands more, it can lead to a multiplier effect (see also deficit spending ). Due to increased demand, the price level tends to increase (or does not decrease). If the central bank counteracts the demand for credit by means of a restrictive monetary policy , interest rates rise, which can lead to a decline in investment . In an open economy , higher interest rates also mean that the respective country becomes interesting for capital investors .
If a state does not have an autonomous monetary policy (does not have its own currency), capital imports are necessary for external debt (the income surpluses arising in the respective surplus country can continue to be made available theoretically and on balance for the expenditure surpluses of the deficit country). If in such a case the creditors lose confidence in the economy (which is dependent on monetary policy), this can lead to sudden capital outflows and a financial crisis and , as a result, an economic crisis .
The most prominent example of a twin deficit is the USA , which has continued to expand its deficits since the early 1980s , initially under Ronald Reagan .
Individual evidence
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^ Ewald Nowotny: Reasons and Limits of Public Debt. In: Economics in theory and practice. Berlin-Heidelberg 2002. ( online ) p. 261:
“Typically, private households have considerable surpluses (net savings). [...] In terms of economic policy, the mandatory balance mechanical relationship ... " - ↑ Council of Experts for the Assessment of Macroeconomic Development: Annual Report 1966/67 (PDF) p. 87, item 154: “If funds flow out from any areas, and this applies to all credit and capital markets (deficit areas), so that here [for example at the domestic credit institutions] there is a need for financing, there are necessarily other areas or bodies to which these funds flow (surplus areas); The funds that flow into one of them naturally always cover exactly the financing needs of the other. The development of the market climate (interest rates, other conditions, shortages) on all money, credit and capital markets, including the bank money market, can never be determined solely from the development of the amounts and the signs of any balances (deficits, surpluses; financing requirements here, amount investable funds there) can be derived or explained. Rather, the decisive factor for the financing climate, even after the occurrence of even the greatest deficits, is whether and under what conditions the surplus areas are ready and able to make the funds flowing to them available again for the deficit areas. "