Are the Twin or Triple Deficits Hypotheses Applicable to Post-Communist Countries?

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Sen H., KAYA A.

PANOECONOMICUS, vol.67, no.4, pp.465-489, 2020 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 67 Issue: 4
  • Publication Date: 2020
  • Doi Number: 10.2298/pan170721028s
  • Journal Name: PANOECONOMICUS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, ABI/INFORM, Central & Eastern European Academic Source (CEEAS), EconLit, PAIS International, Directory of Open Access Journals
  • Page Numbers: pp.465-489
  • Keywords: Fiscal policy, Twin deficits, Triple deficits, Transition economies, Bootstrap panel Granger causality analysis, CURRENT ACCOUNT DEFICITS, GRANGER CAUSALITY ANALYSIS, FELDSTEIN-HORIOKA PUZZLE, EXCHANGE-RATE, OECD COUNTRIES, FISCAL-POLICY, ECONOMIES, REGIME, GROWTH, BUDGET
  • Ankara University Affiliated: Yes

Abstract

This study examines the validity of the twin or triple deficits hypotheses using bootstrap panel Granger causality analysis and an annual panel dataset of six post-communist counties (Russia, Poland, Ukraine, Romania, the Czech Republic, and Hungary) during the period from 1994 to 2015. The results corroborate neither the validity of the twin deficits hypothesis nor its extended version, the triple deficits hypothesis, for any of the sample counties. In other words, we find no Granger causal relationship between budget deficits and external (trade or current account) deficits or among budget deficits, private savings-investment deficits, and external deficits in the counties examined. On the basis of these results, we reject the Keynesian view of the twin or triple deficits hypotheses. Rather, we confirm the Ricardian view.