BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
Are the twin or triple deficits hypotheses applicable to post-communist countries?
() and Ayse Kaya
Abstract: This study empirically examines the validity of the twin
and triple deficits hypotheses using bootstrap panel Granger causality
analysis and an annual panel data set of six post-communist countries
(Russia, Poland, Ukraine, Romania, the Czech Republic, and Hungary) from
1994 to 2012. Our findings, based on panel data analysis under
cross-sectional dependence and country-specific heterogeneity, support
neither the twin deficits hypothesis nor its extended version, the triple
deficits hypothesis, for any of the countries considered. In other words,
we find no Granger-causal relationship between budget deficits and trade
(or current account) deficits or among budget deficits, private
savings-investment deficits, and trade deficits.
Keywords: macroeconomic policy; fiscal policy; twin deficits; triple deficits; post-communist countries; transition economies; bootstrap panel granger causality test; (follow links to similar papers)
JEL-Codes: E60; F30; F32; H62; (follow links to similar papers)
43 pages, February 18, 2016
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