TWIN DEFICIT HYPOTHESIS - CONDITIONAL OR UNIVERSAL SIGNIFICANCE

Gancho Ganchev, Vladimir Tsenkov and Maria Panova
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Gancho Ganchev: South-West University “Neofit Rilski”
Vladimir Tsenkov: South-West University “Neofit Rilski”
Maria Panova: South-West University “Neofit Rilski”

Economic Science, education and the real economy: Development and interactions in the digital age, 2020, issue 1, 33-45

Abstract: The validity of the Tween Deficit Hypothesis (TDH) is tested based on the use of panel data from 188 countries and the use of least squares panel regression. Although the hypothesis presumes a universalism of its application, the empirical results indicate the presence of characteristic groupings of countries. The division is based both on the rejection or acceptance of the hypothesis, as well as on the magnitude and influence of country-specific factors directly influencing the relationship between current account and government budget balances. The empirical data clearly shows the deafferentation of the studied countries based on the level of economic development, as well as based on petrol and manufacturing oriented export countries. Another interesting finding is the fact that countries with a currency board demonstrate the clearest rejection of the TDH between all of the studied countries.

Keywords: current account balance; government budget balance; twin deficit hypothesis; panel regression; G-8; G-20; Eurozone; countries with currency board; OPEC member countries (search for similar items in EconPapers)
JEL-codes: C33 F32 H61 H62 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:vrn:cfdide:y:2020:i:1:p:33-45

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