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Twin Deficits Hypothesis in SEACEN Countries: A Panel Data Analysis of Relationships between Public Budget and Current Account Deficits

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  • Lau, E.
  • Baharumshah, A. Z.

Abstract

In this paper, the twin deficits hypothesis was examined using the panel data of nine SEACEN countries. Empirical results provide evidence to support the view that Asian budget deficit causes current account deficit directly as well as indirectly. From policy perspectives, the statistical analysis suggests that managing budget deficit offers scope for improvement in the current account deficit. However, this finding does not support the policy of manipulating the intermediate variables to reduce the twin deficits to a sustainable level since these variables appear to be endogenous in the system .

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Bibliographic Info

Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 6 (2006)
Issue (Month): 2 ()
Pages:

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Handle: RePEc:eaa:aeinde:v:6:y:2006:i:2_15

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Related research

Keywords: Twin Deficits; Vicious or Virtuous Circle; Panel Analysis; SEACEN Countries;

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References

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Cited by:
  1. Algieri, Bernardina, 2013. "An empirical analysis of the nexus between external balance and government budget balance: The case of the GIIPS countries," Economic Systems, Elsevier, vol. 37(2), pages 233-253.
  2. Misztal, Piotr, 2012. "The link between government budget and current account in the Baltic countries," MPRA Paper 40784, University Library of Munich, Germany.

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