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An Empirical Investigation of Twin Deficits Hypothesis: Evidence from India

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  • Ranjan Kumar Mohanty

    (National Institute of Public Finance and Policy)

Abstract

The paper empirically examines the relationship between fiscal deficit and current account deficit in India for the period from 1970–1971 to 2013–2014. The Autoregressive Distributed Lag (ARDL) bounds testing approach is employed to analyze the long run and short run relationship between the twin deficits. The results support the validity of twin deficits hypothesis in India, both in the short run and long run. Policy makers should adopt various measures to control fiscal deficit for correcting the current account deficit in India.

Suggested Citation

  • Ranjan Kumar Mohanty, 2019. "An Empirical Investigation of Twin Deficits Hypothesis: Evidence from India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(3), pages 579-601, September.
    • Handle: RePEc:spr:jqecon:v:17:y:2019:i:3:d:10.1007_s40953-018-0136-5
    DOI: 10.1007/s40953-018-0136-5
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    3. Engy Raouf, 2020. "A Non-Linear Autoreggresive Distributed Lag Analysis of the Triple Deficit Hypothesis in the Mena Region," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(8), pages 895-905, August.

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