Twin deficit in MENA countries: an empirical investigation

Samia Omrane Belguith

Romanian Economic Journal, 2016, vol. 19, issue 60, 123-146

Abstract: This paper tests the relationship between current account and budget deficits in eight MENA countries using time-series data for the period 1990-2012. The paper uses cointegration analysis, error correction modelling and Granger causality test under a vector autoregression framework. The results show that the direction of causality for the MENA countries is mixed. The ï¬ ndings conï¬ rm that current account deï¬ cit causes budget deï¬ cit for Kuwait and Egypt, whereas the reverse causality is true for Saudi Arabia supporting the twin deficit hypothesis. The results show also that there is no relationship between two deficits for other countries supporting Ricadian equivalence hypothesis (REH).

Keywords: Twin deficit; Fiscal Deficit; current account deficit; granger causality (search for similar items in EconPapers)
JEL-codes: C5 F32 H6 H62 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:rej:journl:v:19:y:2016:i:60:p:123-146

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