Lauren Bowers.
Since the financial crisis the UK’s fiscal and current account balances have persistently been in deficit. These ‘twin’ deficits are significant in historical terms, with a record peacetime fiscal deficit in 2009 and a record current account deficit in 2015. But how closely related are these ‘twins’ and do they pose a risk to financial stability? Using a new ‘from-whom-to-whom’ dataset I find that the two deficits are not directly related to each other and are being financed through relatively stable channels.