Twin Deficits and Feldstein-Horioka Puzzle in the Case Iran

Farzane Bagheri and Fatemeh Daroghe Hazrati

Journal of Social and Development Sciences, 2012, vol. 3, issue 5, 167-171

Abstract: The main purpose of this study is to examine the relationship between budget deficit and current account deficit in Iran's economy through twin deficits and Feldstein-Horioka puzzle. To achieve this goal, Engel-Granger and seemingly unrelated regressions are used during "1971-2007". The results indicate that there exists a long run equilibrium link between budget deficit and current account deficit. There is a one–way causality relationship from the budget deficit toward the current account deficit .Testing the validity of the Feldstein-Horioka puzzle indicates a low level of international capital mobility for Iran.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:rnd:arjsds:v:3:y:2012:i:5:p:167-171

DOI: 10.22610/jsds.v3i5.699

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