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An Empirical Investigation of Twin Deficits Hypothesis: Evidence from India

Ranjan Kumar Mohanty ()
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Ranjan Kumar Mohanty: National Institute of Public Finance and Policy

Journal of Quantitative Economics, 2019, vol. 17, issue 3, No 7, 579-601

Abstract: Abstract The paper empirically examines the relationship between fiscal deficit and current account deficit in India for the period from 1970–1971 to 2013–2014. The Autoregressive Distributed Lag (ARDL) bounds testing approach is employed to analyze the long run and short run relationship between the twin deficits. The results support the validity of twin deficits hypothesis in India, both in the short run and long run. Policy makers should adopt various measures to control fiscal deficit for correcting the current account deficit in India.

Keywords: Fiscal deficit; Current account deficit; Twin deficits hypothesis; ARDL approach; India (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s40953-018-0136-5

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Handle: RePEc:spr:jqecon:v:17:y:2019:i:3:d:10.1007_s40953-018-0136-5