Testing Twin Deficits and Saving-Investment Nexus in Turkey
Ferda Halicioglu and
MPRA Paper from University Library of Munich, Germany
This paper provides fresh evidence on the validity of twin deficit and the Feldstein-Horioka hypotheses for Turkey during the period of 1987-2004 using bounds testing approach to cointegration. In order to explain the main determinants of the current account deficits in the long-run, the fiscal balance and the domestic investments are used in an econometric model.The cointegration tests indicate the presence of a long-run relationship between the current account and budget deficits as well as the domestic investments during the estimation period. As a result, it is concluded that the twin deficit hypothesis and the Feldstein-Horioka puzzle are present and Turkey appeared to be integrated in the world capital market with a low degree of capital mobility as less than 1/5 of its domestic investment is financed through external funds. The augmented Granger-causality tests suggest no causality between the current account and budget deficits, both in the short-run and the long-run. The post-sample variance decompositions suggest that the domestic investments are the main cause of current deficits in the long-run. The paper also discusses the policy implications of the empirical results.
Keywords: twin deficits; Feldstein-Horioka hypotheses; cointegration; Turkey (search for similar items in EconPapers)
JEL-codes: C22 F32 F36 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ara and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/50098/1/MPRA_paper_50098.pdf original version (application/pdf)
Working Paper: Testing Twin Deficits and Saving-Investment Nexus in Turkey (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:50098
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().