On the Twin Deficits Hypothesis and the Import Propensity in Transition Countries

Hubert Gabrisch

No 20/2011, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: This article uses co-integration and related techniques to test for a long-run causal relationship between the fiscal and external deficits of three post-transition countries in Central and Eastern Europe. In addition, an import propensity model is tested by applying OLS and GMM. All the results reject the Twin Deficits Hypothesis. Instead, the results demonstrate that specific transition factors such as a high import intensity of exports and net capital inflows affect the trade balance.

Keywords: Twin Deficits; import propensity; transition countries; Zwillingsdefizite; Importintensität; Transformationsländer (search for similar items in EconPapers)
JEL-codes: E62 F41 H62 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:iwh-20-11

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