Empirical Findings on Triplet Deficits Hypothesis: The Case of Turkey (original) (raw)
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Testing the Validity of the Triplet Deficit Hypothesis for Turkey: Asymmetric Causality Analysis
Eurasian Journal of Business and Economics, 2014
In this study, the validity was analyzed of the triple deficit hypothesis in Turkey between the years 1960 and 2012. First, the stationarity of positive and negative shocks related to the current account deficit, budget deficit, and savings gap was tested. As a result of unit root tests, it was concluded that all the positive and negative shocks were I(1). Then, the causal relationship was analyzed with regard to the aforesaid shocks of variables by means of an asymmetric causality test. As a result of the asymmetric causality test, bi-directional causality was found between the current account deficit and the budget deficit and between the current account deficit and savings gap. Therefore, it can be concluded that the triple deficit hypothesis is valid in Turkey.
The Twin Deficits Phenomenon In Turkey: An Empirical Investigation
Journal of Business, Economics and Finance, 2013
The aim of this study is to explore the relationship between budget deficit and the current account deficit for Turkey over the period 19872005. Considering the structural breaks in the series, the stationarity analysis is employed by means of Zivot- Andrews unit root test. In the succeeding step of the methodology, by utilizing Toda Yamamato test, the causality relationship between the budget deficit and the current account deficit is examined. The empirical results indicate that current account deficit is a causing variable for the budget deficit in Turkish economy.
Twin deficit hypothesis: evidence from the Turkish economy
Dogus University Journal, 2012
The Turkish economy has functioned according to the outward-oriented growth model since 24 January 1980, when structural changes and transformation decisions were agreed upon. However, chronic external deficit problems have been encountered since the adoption of the outward-oriented growth model. The purpose of this study is to test the hypothesis of twin deficits for period 1980-2009 in Turkish economy. In this context, the relationship between budget deficits and current account deficits have been examined theoretically. And the direction of this relationship has been analyzed empirically by means of the VAR Granger causality test and regression analysis. The findings reveal that there is in fact a causality relationship from the budget deficits towards current account deficits.
The Role of Twin Deficits Problem in Sustainable Growth: An Econometric Analysis for Turkey
AbstrAct In economics literature the relationship between budget deficit and current account deficit is known as twin deficits hypothesis. The Keynesian Approach accepts a relationship between two deficits. In contrast to this, ricardian equivalence Hypothesis defends there is no relationship between these two deficits. twin deficits have become the subject of several studies to test which of these hypotheses are reliable but no consensus has been achieved. some studies found a relationship from budget deficit to current account deficit but some of them had the opposite result. especially after 1980 it is known that many developed and developing countries encountered with this twin deficits problem. turkey also has the problem of twin deficits. Therefore, it is important to find whether there is causality between them and the direction of this causality. In this study the relationship between budget deficit and current account deficit is examined by using Johansen cointegration Analysis. This study is based on period 1996:Q1-2011:Q4. According to results of co-integration; variable coefficients are statistically significant and consistent with what we expected in hypotheses. current account deficit (cAd) has a significant negative effect on budget deficit (Bd). When there is a 1% increase in cAd, Bd decreases 0,12%. This finding is consistent with economic theory because according to Keynesian Approach two deficits have relationship with each other. However, in contrast to this approach, the direction is from cAd to Bd and also coefficient is negative.
The Relationship between Current Deficit and Economic Growth: An Empirical Study on Turkey
Procedia. Economics and finance, 2015
This study aims to examine the relationship between the current account deficit and economic growth in Turkey. For this purpose, Granger causality and VAR analyses were performed on the variables by using their quarter data for 1999:01-2014:02. Granger causality test revealed a unidirectional correlation from growth rate to current account deficit. As shown by the impulse-response functions obtained through VAR analysis, a shock of one standard deviation on the growth rate variable results in effect on the current account deficit variable. Furthermore, in the variance decomposition analysis, growth rate accounts for 53.25% of the prediction error variance for current account deficit during the tenth period, while the current account deficit variable itself accounts for the remaining 46.75% of the prediction error variance.
PROBING THE EVIDENCE OF TRIPLE DEFICIT HYPOTHESIS IN PAKISTAN
This research seeks to empirically test a third dimension to the twin deficit hypothesis and examines the co-movement of a third deficit known as the current and financial account balance. A conceptual framework based on income expenditure approach is developed for co-integration. The study uses annual data of Pakistan covering the period 1980 to 2014. The ARDL bound testing approach finds that the three deficits namely budget deficit, current account deficit and capital and financial account deficit are linearly correlated in the long-run. Further the study found that causality runs directly from current account to budget balance and financial balance, which is a strong evidence of triple deficit hypothesis.
The purpose of this study is to investigate the twin deficit problem for the Turkish economy using bounds testing approach known as ARDL (autoregressive distributed lag) to cointegration method and Toda and Yamamoto (1995) Granger causality test. The study covers the annual data from 1974 to 2010. The cointegration test results suggest that the variables are moving together in the long run. The positive value on the budget deficit coefficient implies that Turkey has a twin deficit problem. The presence of twin deficit has also been supported by the Toda-Yamamota causality test results. As expected, the negative and less than 1 investment coefficient indicates Feldstein-Horioka hypothesis holds. Further, it indicates that Turkey could not well-integrated into the international capital markets with the model revealing that one fifth of the investments are financed through foreign savings
Romanian Journal of Economic Forecasting, 2018
Twin deficits hypothesis has been one of the most widely-applied phenomenon in the economics literature. In this study, the twin deficits hypothesis was tested for the EU-27 member states and Turkey with the data covering the 2002:Q1-2014:Q1 period. Unlike other studies, the twin deficits hypothesis was tested by using second generation panel causality tests that considered the cross-sectional dependence. According to the findings of this study, which used panel Granger causality tests suggested by Dumitrescu-Hurlin (2012) and Emirmahmutoğlu-Kose (2011), there is statistically significant bidirectional causality between budget deficit (BD) and current account deficit (CAD) in the relevant period. It was found out a bidirectional causality between BD and CAD in sixteen of the twenty-eight countries Turkey and the UK) and a unidirectional causality from BD to CAD was also noticed in five EU countries (Cyprus, Latvia, Lithuania, Poland and Slovakia). Nevertheless, the findings indicated that there is a unidirectional causality from CAD to BD in Hungary, Luxembourg and Malta but there is no causality between BD and CAD in Ireland, Portugal, Slovenia, and Sweden.
This paper investigates the relationship between current account and government budget balances. We tested the validity of the Twin Deficits Hypothesis (TDH)in Egypt, using annual time series data for the period (1990-2012). We rejected the TDH, as granger causality tests proved a reverse causal relationship running from the current account deficit to the budget deficit. A "twin divergence" was found to exist between the two deficits in the short run, also the Vector Error Correction Model (VECM) proved the existence of a negative long run equilibrium relationship between both current account and government budget balances, with a relatively high speed of adjustment toward the equilibrium position; as it takes about one year and 4 months to restore the equilibrium position after divergence occurs.
Measures of the Output Gap in Turkey: An Empirical Assessment of Selected Methods
International journal of economics and financial research, 2019
This article seeks to examine the impact of the Bangladesh"s stock market development on its economic growth from the period of 1989-2012. We have used Johansen Cointegration test to estimate the long-run equilibrium relationship between the variables and the Granger causality test was conducted in order to establish causal relationship, while the model was estimated using the error correction model (ECM). Johansen co-integration test results show that the Bangladesh"s stock market development and economic growth are co-integrated. This indicates that a long run relationship exists between stock market development and economic growth in Bangladesh. The causality test results suggest a unidirectional causality from stock market development to the economic growth. On the other hand, there is no "reverse causation" from economic growth to stock market development. The evidence from this study reveals that the activities in the stock market tend to impact positively on the economy. It is recommended therefore that stock market regulatory authority should therefore address policy issues that are capable of boosting the investors" confidence through improved policy formulation and creation of awareness.