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Twin Deficits in Sub-Saharan African Countries: Evidence through debt

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  • Idrys Fransmel Okombi

    (Marien Ngouabi University)

Abstract

This article tests the twin deficits hypothesis using different debt regimes with a panel of 30 African countries over the period 2004-2017. To do so, a panel threshold regression (PTR) has been used. Our results reveal that the estimated debt thresholds, as a percentage of GDP, are 78.40 for total public debt, 65.25 for external debt and 13.15 for domestic debt. Below these debt thresholds, the fiscal balance has a positive effect on the current account. The twin deficits hypothesis is therefore validated. However, beyond these debt thresholds, the fiscal balance has no significant effect on the current account; the twin deficits hypothesis is rejected.

Suggested Citation

  • Idrys Fransmel Okombi, 2020. "Twin Deficits in Sub-Saharan African Countries: Evidence through debt," Economics Bulletin, AccessEcon, vol. 40(3), pages 2550-2564.
    • Handle: RePEc:ebl:ecbull:eb-20-00036
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    More about this item

    Keywords

    Current account; fiscal balance; public debt; Africa;
    All these keywords.

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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