Ricardian Equivalence, Twin Deficits, and the Feldstein-Horioka puzzle in Egypt

Carlos Marinheiro ()

No 2006-07, GEMF Working Papers from GEMF, Faculty of Economics, University of Coimbra

Abstract: Egypt has presented important budget imbalances. This paper tries to evaluate whether Egypt’s public deficit has had any impact on current account imbalances, examining the validity of the twin deficit hypothesis for Egypt. We conclude for the presence of a (weak) long-run relationship between the budget deficit and the current account deficit. Yet, we reject the twin-deficit hypothesis: we found evidence in favour of a reverse Granger-causality running from the external deficit to the budget deficit. Further, we conclude against the validity of full Ricardian equivalence in Egypt and present evidence in favour of a high degree of capital mobility.

Keywords: Twin deficits; current account deficit; Feldstein-Horioka puzzle; Egypt; Fiscal policy (search for similar items in EconPapers)
JEL-codes: E62 F32 H6 O55 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published in Journal of Policy Modeling 30(6): 1041-1056, 2008.

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Journal Article: Ricardian equivalence, twin deficits, and the Feldstein-Horioka puzzle in Egypt (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:gmf:wpaper:2006-07

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