Revisiting Budget and Trade Deficits in Lebanon: A Critique

Hazem Marashdeh () and Ali Salman Saleh ()
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Hazem Marashdeh: University of Wollongong, http://www.uow.edu.au/commerce/econ/who/index.html
Ali Salman Saleh: Monash University Malaysia

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

Abstract: This study re-examines the relationship between the budget deficit and the trade deficit in Lebanon. In contrast to earlier studies, we start by testing for a unit root in the presence of structural change using the Innovational Outlier (IO) model. This study also utilizes the newly proposed autoregressive distributed lag (ARDL) approach to examine such a relationship. The results show that the endogenously determined times of the breaks coincide with observed real events occurring during the years of Civil War in Lebanon and especially after the Israeli invasion of Beirut in 1982. This study finds, as well, that the trade deficit in Lebanon has a long run impact on the budget deficit.

Keywords: Budget deficit; trade deficit; structural break; ARDL; Lebanon (search for similar items in EconPapers)
JEL-codes: C13 C22 E6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-mac
Date: 2006
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