Journal:Business and Economics Research Journal
Title of Article:Assessing the Twin Deficits Hypothesis in Selected OECD Countries: An Empirical Investigation
Author(s):Mehmet Nargelecekenler, Uludag University, Faculty of Economics and Administration Sciences, [email protected]
Filiz Giray, Uludag University, Faculty of Economics and Administration Sciences, [email protected]
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.
Keywords:Twin deficits, panel unit root, structural breaks, panel cointegration
JEL Classification:C23, E6, F4