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Federal Reserve Bank of San Francisco
Working Paper Series
Government consumption expenditures and the current account
Michele Cavallo
Abstract

This paper distinguishes between two components of government consumption, expenditure on final goods and expenditure on hours, and compares the effects of changes in these two on the current account. I find that changes in government expenditure on hours do not directly affect the current account and that their impact is considerably smaller than the impact produced by changes in government expenditure on final goods. These findings indicate that considering government consumption as entirely expenditure on final goods leads to overestimating its role in accounting for movements in the current account balance.


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Michele Cavallo, Government consumption expenditures and the current account, Federal Reserve Bank of San Francisco, Working Paper Series 2005-03, 2005.
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Keywords: Expenditures; Public ; Trade ; Gross domestic product
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