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Assessing the Twin Deficits Hypothesis in Selected OECD Countries: An Empirical Investigation

Author

Listed:
  • Nargelecekenler, Mehmet

    (Uludag University)

  • Giray, Filiz

    (Uludag University)

Abstract

The improvement of budget deficits and current account deficits has renewed the debate over the twin deficits hypothesis. This paper examines the validity of the twin deficits hypothesis in nine members of the Organizations for Economic Co-operation and Development (OECD) over the period 1990-2007. We use recently developed panel cointegration tests with structural breaks to assess the relationship between budget deficits and current account deficits. The empirical findings in this paper are as follows: (1) There is a long-run relationship between budget deficits and current account deficits for these countries; (2) The empirical result is consistent with the Keynesian proposition.

Suggested Citation

  • Nargelecekenler, Mehmet & Giray, Filiz, 2013. "Assessing the Twin Deficits Hypothesis in Selected OECD Countries: An Empirical Investigation," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 4(4), pages 1-1, October.
    • Handle: RePEc:ris:buecrj:0131
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    Cited by:

    1. Sarah El-Khishin & Jailan El-Saeed, 2021. "The Twin Deficit Hypothesis in the MENA Region: Do Geopolitics Matter?," Economies, MDPI, vol. 9(3), pages 1-17, September.

    More about this item

    Keywords

    Twin deficits; panel unit root; structural breaks; panel cointegration;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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