Ricardian Equivalence, Twin Deficits, and the Feldstein-Horioka puzzle in Egypt
AbstractEgypt has presented important budget imbalances. This paper tries to evaluate whether Egypt’s public deficit has had any impact on current account imbalances, examining the validity of the twin deficit hypothesis for Egypt. We conclude for the presence of a (weak) long-run relationship between the budget deficit and the current account deficit. Yet, we reject the twin-deficit hypothesis: we found evidence in favour of a reverse Granger-causality running from the external deficit to the budget deficit. Further, we conclude against the validity of full Ricardian equivalence in Egypt and present evidence in favour of a high degree of capital mobility.
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Bibliographic InfoPaper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2006-07.
Length: 39 pages
Date of creation: 2006
Date of revision:
Publication status: Published in Journal of Policy Modeling 30(6): 1041-1056, 2008.
Twin deficits; current account deficit; Feldstein-Horioka puzzle; Egypt; Fiscal policy;
Other versions of this item:
- Marinheiro, Carlos Fonseca, 2008. "Ricardian equivalence, twin deficits, and the Feldstein-Horioka puzzle in Egypt," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 1041-1056.
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H6 - Public Economics - - National Budget, Deficit, and Debt
- O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa
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