Twin Deficit Hypothesis: A Case of Pakistan

Farrah Yasmin ()
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Farrah Yasmin: The Women University Multan, Postal: Office of Research, Innovation and Commercialization Sukkur Institute of Business Administration Airport Road Sukkur-65200, Sindh Pakistan

Sukkur IBA Journal of Management and Business, 2015, vol. 2, issue 1, 71-84

Abstract: The prime motive of this study is to scrutinize the twin deficit for annual time series data over the period 1990-2010 for Pakistan. Twin deficit hypothesis expressed that an expansion in budget deficit will ground for rise in current account deficit. To diagnose affiliation amongst couple of variables, applied Unit root test (ADF-test), Johansen cointegration technique, Impulse response function and Granger causality test. The Granger causality demonstrate that the causality direction travel from current account deficit to budget deficit. When current account deficit occurs it leads to budget deficit. So the finding proves that there is a positive connection among both variables. Investigations are most reliable for Pakistan economy. Finally, this study confirms the rapport amid current account deficit and budget deficit.

Keywords: Budget deficit; Current account deficit; Pakistan (search for similar items in EconPapers)
JEL-codes: C01 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:ibajmb:0012

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