Twin Deficits Across 140 Economies, 1990–2024: An Exact Private-Offset Identity, Between Versus Within Slopes, and India

Does a larger government deficit come with a larger current-account deficit? Using World Bank data on the current account and general government net lending (both percent of GDP) for 140 economies and 3,424 country-years from 1990 to 2024, I show that the answer depends almost entirely on which variation is used. The pooled slope of the current account on the fiscal balance is 0.88, the slope across country averages is 1.10, the slope within countries over time is 0.77 (0.80 with year effects; clustered standard error 0.089), and the slope of first differences is 0.52. The median slope from 116 country-specific regressions is only 0.27. I prove that each slope equals one plus the slope of the private balance on the fiscal balance, so the gap from one is an exact measure of private offset. The private offset is zero across countries and about one-quarter within countries in levels, and about one-half in annual changes. For India (30 years with data) the country slope is 0.13 and the first-difference slope is 0.15, and the correlation between the private and fiscal balances is minus 0.58: Indian fiscal deficits have been mostly matched by private surpluses, not by external deficits. In the pandemic year 2020 the median fiscal balance fell by 4.8 points of GDP while the median current account rose by 0.45 points.