The Role Of Twin Deficit Problem In Sustainable Growth: An Econometric Analysis For Turkey

UCAL, Halil and Bolukbas , Mehmet (2013) The Role Of Twin Deficit Problem In Sustainable Growth: An Econometric Analysis For Turkey. Journal of Economic and Social Studies, 3 (2). pp. 39-53. ISSN 1986 – 8502, doi: 10.14706/JECOSS11323

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Abstract

In economics literature the relationship between budget deficit and current account deficit is known as twin deficits hypothesis. The Keynesian Approach accepts a relationship between two deficits. In contrast to this, icardian quivalence Hypothesis defends there is no relationship between these two deficits. win deficits have become the subject of several studies to test which of these hypotheses are reliable but no consensus has been achieved. ome studies found a relationship from budget deficit to current account deficit but some of them had the opposite result. specially after 1980 it is known that many developed and developing countries encountered with this twin deficits problem. urkey also has the problem of twin deficits. Therefore, it is important to find whether there is causality between them and the direction of this causality. In this study the relationship between budget deficit and current account deficit is examined by using Johansen ointegration Analysis. This study is based on period 1996:Q1-2011:Q4. According to results of cointegration; variable coefficients are statistically significant and consistent with what we expected in hypotheses. urrent account deficit ( A ) has a significant negative effect on budget deficit (B ). When there is a 1% increase in A , B decreases 0,12%. This finding is consistent with economic theory because according to Keynesian Approach two deficits have relationship with each other. However, in contrast to this approach, the direction is from A to B and also coefficient is negative.

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Journal of Economic and Social Studies
Depositing User: Mrs. Emina Mekic
Date Deposited: 29 Apr 2014 13:48
Last Modified: 29 Apr 2014 13:48
URI: http://eprints.ibu.edu.ba/id/eprint/2385

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