ON THE TWIN DEFICITS HYPOTHESIS: EVIDENCE FROM TURKEY

Burcu Kiran

Applied Econometrics and International Development, 2011, vol. 11, issue 1

Abstract: This paper examines the long run relationship between trade deficit and budget deficit in Turkey in the context of fractional cointegration approach. This approach relaxes the assumption in the conventional cointegration analyses that the cointegrating residuals must be integrated of zero and allows it to take any real value. The empirical results of the annual data over the period from 1975 to 2009 show that there is little evidence for the presence of fractional cointegration relationship between trade deficit and budget deficit, hence, for the validity of twin deficits hypothesis in Turkey.

Keywords: C10; E60; F10 (search for similar items in EconPapers)
Date: 2011
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