EconPapers    
Economics at your fingertips  
 

TWIN SONS OF DIFFERENT MOTHERS: THE LONG AND THE SHORT OF THE TWIN DEFICITS DEBATE

Kevin Grier () and Haichun Ye ()

Economic Inquiry, 2009, vol. 47, issue 4, 625-638

Abstract: Interest in the twin deficits hypothesis fluctuates in tandem with the U.S. current account deficit. Surprisingly though, a statistically robust relationship between budget and trade deficits has been difficult to pin down. We argue that a big part of this difficulty is due to the failure to allow for structural breaks in the series when (either explicitly or implicitly) modeling their time series properties. We show that both series are break stationary (and conditionally heteroskedastic) and argue that while there is no common pattern in the long run, the short‐run dynamics reveal a sizeable and fairly persistent positive relationship between budget deficit shocks and current account deficit shocks. (JEL F41, E6, H6)

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/j.1465-7295.2008.00162.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ecinqu:v:47:y:2009:i:4:p:625-638

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0095-2583

Access Statistics for this article

Economic Inquiry is currently edited by Preston McAfee

More articles in Economic Inquiry from Western Economic Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-08-20
Handle: RePEc:bla:ecinqu:v:47:y:2009:i:4:p:625-638