The twin deficits in selected central and Eastern European economies: Bounds testing approach with causality analysis

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Date

2014

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Institute foe Economic Forecasting

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Abstract

The aim of our paper is to explore empirically the existence of the long-run relationship and the direction of causality between the budget and current account deficits for some selected Central and Eastern European economies. Bulgaria, Latvia, Lithuania, Poland, Romania, Serbia and Slovenia are the sample countries. The empirical analysis hinges on the Pesaran, Shin, and Smith (2001) bounds testing approach to co-integration and Granger non-causality. No evidence in favor of twin deficits hypothesis has been obtained for the selected countries, except for Bulgaria, as the results support non-causality.

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Keywords

Bounds testing, Budget deficit, Current account deficit, Granger non-causality, Twin deficits hypothesis

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Citation

13

WoS Q

Q4

Scopus Q

Q2

Source

Romanian Journal of Economic Forecasting

Volume

17

Issue

2

Start Page

141

End Page

160