ANALYSIS OFTWIN DEFICITS HYPOTHESIS IN TURKEY BETWEEN 1950-2005, USING COINTEGRATION ANALAYSIS AND GRANGER COUSALITYTEST

Zeynep Erdinc ()
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Zeynep Erdinc: Anadolu University

Anadolu University Journal of Social Sciences, 2008, vol. 8, issue 1, pages 209-222

Abstract: TTwin deficit hypothesis indicates the existance of a relationship between budget deficits and current account. The implications of Conventional Keynesian Theory, which asserts that budget deficits induces current account deficits, are different from the Ricardian Equivalance Theory , which claims that there is no causal relationship between budget deficits and current account deficits. In this study, the relationship between budget deficits and current account deficits in Turkey for 1950- 2005 period is examined with annual data by using recently developed time series econometric tecniques such as the cointegration analysis and Granger Causality Test. In cointegration analysis, it is found that thereis a long run relationship between budget deficits and current account deficits. This conclusion supports the Conventional Keynesian Theory. Moreover, according to Granger causality tests results, the causality runs from budget deficits to current account deficit

Keywords: Twin Deficits Hypothes›s; Budget Deficits; Current Account; Granger Causality Test; Cointegration Analys›s. (search for similar items in EconPapers)
JEL-codes: F41 C49 (search for similar items in EconPapers)
Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:and:journl:v:8:y:2008:i:1:p:209-222

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