The relationships between budget deficits and balance of the current account in Australia, the United States and Italy

The problem. This study investigated the relationship between the government budget deficit and the balance of the current account in Australia, the United States, and Italy.; Method. Quarterly data from the period of 1973:1 to 1991:3 was used for this study, and the ordinary least squares method was employed for the calculations found in this study.; Results. The results of this study indicated that there is a relationship between budget deficit and the balance of the current account in the case of Australia. It also indicated that the gross domestic product is one of the major factors that explains why the current account changed over the time period.; The empirical evidence of the United States indicated that there is no relationship between the budget deficit and the balance of the current account. The study confirmed that the current account deficit, the exchange rate, and interest rate connection is strong and robust in the case of the United States.; The empirical evidence for Italy indicated that there is a relationship between the expected budget deficit and the balance of the current account. It also indicates that the monetary, exchange, rate and interest rate variables are the major factors to determine changes in the balance of the current account.