The Twin Deficits Phenomenon In Turkey: An Empirical Investigation

Abstract

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.

Keywords

• Budget deficit,current account deficit,structural break,causality.

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