Özgür Bayram Soylu
Kocaeli University/Faculty of Economics and Administrative Sciences/Department of Economics/Department of Policy of Economics, Kocaeli/Turkey
DOI: https://doi.org/10.31410/ITEMA.2018.348
2nd International Scientific Conference on Recent Advances in Information Technology, Tourism, Economics, Management and Agriculture – ITEMA 2018 – Graz, Austria, November 8, 2018, CONFERENCE PROCEEDINGS published by the Association of Economists and Managers of the Balkans, Belgrade, Serbia; ISBN 978-86-80194-13-4
2nd International Scientific Conference on Recent Advances in Information Technology, Tourism, Economics, Management and Agriculture – ITEMA 2018 – Graz, Austria, November 8, 2018, CONFERENCE PROCEEDINGS published by the Association of Economists and Managers of the Balkans, Belgrade, Serbia; ISBN 978-86-80194-13-4
Abstract
The main aim of this paper is to investigate the twin deficit problem for the Indian economy using Granger Causality Test for the period 1988-2017. The co-integration analysis shows that there is a long run relation between budget deficit and current account balance. Despite the high savings rates, the twin deficits are valid for the Indian economy. The direction of the relationship is budget deficit to current account balance according to Granger Causality Test results. This result is consistent with the traditional Keynesian twin deficit hypothesis.
Key words
Budget Deficit, Current Account Balance, Twin Deficits, Granger Causality.
References
[[1]. Akbostanci, E. & Tunç, G. İ. (2001). Turkish twin effects: An error correction model of trade balance (No. 0106). ERC-Economic Research Center, Middle East Technical University.
[2]. Bachman, D. D. (1992). Why is the US current account deficit so large? Evidence from vector auto regressions. Southern Economic Journal, 232-240.
[3]. Baharumshah, A. Z. Lau, E. & Khalid, A. M. (2006). Testing twin deficits hypothesis using VARs and variance decomposition. Journal of the Asia Pacific economy, 11(3), 331-354.
[4]. Bayraktutan, Y. & Demirtaş, I. (2011). Gelişmekte Olan Ülkelerde Cari Açiğin Belirleyicileri: Panel Veri Analizi. Kocaeli Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, (22), 1-28.
[5]. Bhat, J. A. & Sharma, N. K. (2018). The twin-deficit hypothesis: revisiting Indian economy in a nonlinear framework. Journal of Financial Economic Policy.
[6]. Chihi, F. & Normandin, M. (2013). External and budget deficits in some developing countries. Journal of International Money and Finance, 32, 77-98.
[7]. Darrat, A. F. (1988). Have large budget deficits caused rising trade deficits?. Southern Economic Journal, 879-887.
[8]. Erdinç, Z. (2008). İkiz Açıklar Hipotezinin Türkiye’de 1950-2005 Yılları Arasında Eş Bütünleşme Analizi Ve Granger Nedensellik Testi İle İncelenmesi.
[9]. Erdoğan, S. & Bozkurt, H. (2009). Türkiye’de cari açığın belirleyicileri: MGARCH modelleri ile bir inceleme. Maliye Finans Yazıları, 1(84).
[10]. Ganchev, G. T. Stavrova, E. & Tsenkov, V. (2012). Testing the twin deficit hypothesis: The case of Central and Eastern Europe countries. International Journal of Contemporary Economics and Administrative Sciences, 2(1), 1-21.
[11]. Haug, A. A. (1990). Ricardian Equivalence, rational expectations and the permanent income hypothesis. Journal of Money, Credit and Banking, 22(3), 305-326.
[12]. Helmy, H. E. (2018). The twin deficit hypothesis in Egypt. Journal of Policy Modeling, 40(2), 328-349.
[13]. Kalou, S. & Paleologou, S. M. (2012). The twin deficits hypothesis: Revisiting an EMU country. Journal of Policy Modeling, 34(2), 230-241.
[14]. Kaufmann, S. Scharler, J. & Winckler, G. (2002). The Austrian current account deficit: Driven by twin deficits or by intertemporal expenditure allocation? Empirical Economics, 27(3), 529-542.
[15]. Khalid, A. M. & Guan, T. W. (1999). Causality tests of budget and current account deficits: Cross-country comparisons. Empirical Economics, 24(3), 389-402.
[16]. Kim, C. H. & Kim, D. (2006). Does Korea have twin deficits? Applied Economics Letters, 13(10), 675-680.
[17]. Kouassi, E. Mougoue, M. & Kymn, K. O. (2004). Causality tests of the relationship between the twin deficits. Empirical Economics, 29(3), 503-525.
[18]. Krugman,P.R ve Obstfeld,M (2006). International Economics Theory-Policy, Seventh edition,
[19]. Mohanty, R. K. (2018). An Empirical Investigation of Twin Deficits Hypothesis: Evidence from India. Journal of Quantitative Economics, 1-23.
[20]. Parkin, Michael (2000), Economics, Fifth Edition, Addison-Wesley Publishing Company, United States.
[21]. Pattichis, C. (2004). Budget and trade deficits in Lebanon. Applied Economics Letters, 11(2), 105-108.
[22]. Pearson Addison Wesley,285-291.
[23]. Perera, A. & Liyanage, E. (2012). An empirical investigation of the twin deficit hypothesis: Evidence from Sri Lanka. Staff Studies, 41(1).
[24]. Ravinthirakumaran, N. Selvanathan, S. & Selvanathan, E. A. (2016). The twin deficits hypothesis in the SAARC countries: an empirical investigation. Journal of the Asia Pacific Economy, 21(1), 77-90.
[25]. Trachanas, E. & Katrakilidis, C. (2013). The dynamic linkages of fiscal and current account deficits: New evidence from five highly indebted European countries accounting for regime shifts and asymmetries. Economic Modeling, 31, 502-510.
[26]. Turan, T. & Karakas, M. (2018). Asymmetries In Twin Deficit Hypothesis: Evidence From Cee Countries. Ekonomický časopis (Journal of Economics), 66(6).
[27]. Vamvoukas, G. A. (1999). The twin deficits phenomenon: evidence from Greece. Applied economics, 31(9), 1093-1100.
[28]. Winner, L. E. (1993). The relationship of the current account balance and the budget balance. The American Economist, 37(2), 78-84.
[29]. Xie, Z. & Chen, S. W. (2014). Untangling the causal relationship between government budget and current account deficits in OECD countries: Evidence from bootstrap panel Granger causality. International Review of Economics & Finance, 31, 95-104.
[30]. Zietz, J. & Pemberton, D. K. (1990). The US budget and trade deficits: a simultaneous equation model. Southern Economic Journal, 23-34.
[2]. Bachman, D. D. (1992). Why is the US current account deficit so large? Evidence from vector auto regressions. Southern Economic Journal, 232-240.
[3]. Baharumshah, A. Z. Lau, E. & Khalid, A. M. (2006). Testing twin deficits hypothesis using VARs and variance decomposition. Journal of the Asia Pacific economy, 11(3), 331-354.
[4]. Bayraktutan, Y. & Demirtaş, I. (2011). Gelişmekte Olan Ülkelerde Cari Açiğin Belirleyicileri: Panel Veri Analizi. Kocaeli Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, (22), 1-28.
[5]. Bhat, J. A. & Sharma, N. K. (2018). The twin-deficit hypothesis: revisiting Indian economy in a nonlinear framework. Journal of Financial Economic Policy.
[6]. Chihi, F. & Normandin, M. (2013). External and budget deficits in some developing countries. Journal of International Money and Finance, 32, 77-98.
[7]. Darrat, A. F. (1988). Have large budget deficits caused rising trade deficits?. Southern Economic Journal, 879-887.
[8]. Erdinç, Z. (2008). İkiz Açıklar Hipotezinin Türkiye’de 1950-2005 Yılları Arasında Eş Bütünleşme Analizi Ve Granger Nedensellik Testi İle İncelenmesi.
[9]. Erdoğan, S. & Bozkurt, H. (2009). Türkiye’de cari açığın belirleyicileri: MGARCH modelleri ile bir inceleme. Maliye Finans Yazıları, 1(84).
[10]. Ganchev, G. T. Stavrova, E. & Tsenkov, V. (2012). Testing the twin deficit hypothesis: The case of Central and Eastern Europe countries. International Journal of Contemporary Economics and Administrative Sciences, 2(1), 1-21.
[11]. Haug, A. A. (1990). Ricardian Equivalence, rational expectations and the permanent income hypothesis. Journal of Money, Credit and Banking, 22(3), 305-326.
[12]. Helmy, H. E. (2018). The twin deficit hypothesis in Egypt. Journal of Policy Modeling, 40(2), 328-349.
[13]. Kalou, S. & Paleologou, S. M. (2012). The twin deficits hypothesis: Revisiting an EMU country. Journal of Policy Modeling, 34(2), 230-241.
[14]. Kaufmann, S. Scharler, J. & Winckler, G. (2002). The Austrian current account deficit: Driven by twin deficits or by intertemporal expenditure allocation? Empirical Economics, 27(3), 529-542.
[15]. Khalid, A. M. & Guan, T. W. (1999). Causality tests of budget and current account deficits: Cross-country comparisons. Empirical Economics, 24(3), 389-402.
[16]. Kim, C. H. & Kim, D. (2006). Does Korea have twin deficits? Applied Economics Letters, 13(10), 675-680.
[17]. Kouassi, E. Mougoue, M. & Kymn, K. O. (2004). Causality tests of the relationship between the twin deficits. Empirical Economics, 29(3), 503-525.
[18]. Krugman,P.R ve Obstfeld,M (2006). International Economics Theory-Policy, Seventh edition,
[19]. Mohanty, R. K. (2018). An Empirical Investigation of Twin Deficits Hypothesis: Evidence from India. Journal of Quantitative Economics, 1-23.
[20]. Parkin, Michael (2000), Economics, Fifth Edition, Addison-Wesley Publishing Company, United States.
[21]. Pattichis, C. (2004). Budget and trade deficits in Lebanon. Applied Economics Letters, 11(2), 105-108.
[22]. Pearson Addison Wesley,285-291.
[23]. Perera, A. & Liyanage, E. (2012). An empirical investigation of the twin deficit hypothesis: Evidence from Sri Lanka. Staff Studies, 41(1).
[24]. Ravinthirakumaran, N. Selvanathan, S. & Selvanathan, E. A. (2016). The twin deficits hypothesis in the SAARC countries: an empirical investigation. Journal of the Asia Pacific Economy, 21(1), 77-90.
[25]. Trachanas, E. & Katrakilidis, C. (2013). The dynamic linkages of fiscal and current account deficits: New evidence from five highly indebted European countries accounting for regime shifts and asymmetries. Economic Modeling, 31, 502-510.
[26]. Turan, T. & Karakas, M. (2018). Asymmetries In Twin Deficit Hypothesis: Evidence From Cee Countries. Ekonomický časopis (Journal of Economics), 66(6).
[27]. Vamvoukas, G. A. (1999). The twin deficits phenomenon: evidence from Greece. Applied economics, 31(9), 1093-1100.
[28]. Winner, L. E. (1993). The relationship of the current account balance and the budget balance. The American Economist, 37(2), 78-84.
[29]. Xie, Z. & Chen, S. W. (2014). Untangling the causal relationship between government budget and current account deficits in OECD countries: Evidence from bootstrap panel Granger causality. International Review of Economics & Finance, 31, 95-104.
[30]. Zietz, J. & Pemberton, D. K. (1990). The US budget and trade deficits: a simultaneous equation model. Southern Economic Journal, 23-34.
