Abstract
This paper Examines the current account effect of government spending. It is show that in a neoclassical framework transitory (permanent0 changes in government spending reduce (leave unaffected) the trade balance. Using data for Australia, Italy, Sweden, the U. K., and the U. S., the paper finds that the effects of permanent changes are consistent with the theory for all countries, whereas those of transitory changes are consistent only for the U. K. and the U. S. and the U. S. Potential explanations are offered, and policy implications are discussed. [F41]
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