Twin Deficits Phenomenon: Empirical Evidence from the ARDL Bound Test Approach for Turkey

Ali Acaravci, Ilhan Ozturk

Abstract


The purpose of this paper is to examine the general validity of twin deficits hypothesis for Turkey during the period 1987:1 to 2005:4. In this study, the autoregressive distributed lag (ARDL) model and the bounds test for cointegration were used to assess the short-run and long-run dynamics between the twin deficits in Turkey. The empirical analysis in this paper rejects the Ricardian Equivalence Hypothesis and supports the Keynesian view that there is a long-run relationship between budget deficit and current account imbalances. The empirical results also indicate that the direction of causality runs from the budget deficit to the current account deficit.

Keywords


Twin deficits, current account deficit, budget deficit, ARDL, Turkey



Disclaimer/Regarding indexing issue:

We have provided the online access of all issues and papers to the indexing agencies (as given on journal web site). It’s depend on indexing agencies when, how and what manner they can index or not. Hence, we like to inform that on the basis of earlier indexing, we can’t predict the today or future indexing policy of third party (i.e. indexing agencies) as they have right to discontinue any journal at any time without prior information to the journal. So, please neither sends any question nor expects any answer from us on the behalf of third party i.e. indexing agencies.Hence, we will not issue any certificate or letter for indexing issue. Our role is just to provide the online access to them. So we do properly this and one can visit indexing agencies website to get the authentic information. Also: DOI is paid service which provided by a third party. We never mentioned that we go for this for our any journal. However, journal have no objection if author go directly for this paid DOI service.