Budget-current account deficits nexus in Malaysia
AbstractThe purpose of this study is to contribute further on the twin deficits debate in a developing economy. The data for Malaysia over four decades is used as a case study. Empirical result obtained from the Johansen-Juselius (1990) cointegration test indicates that budget deficit and current account deficit do not contain common stochastic trend in the long run. However, the findings from the Granger non-causality test by Toda-Yamamoto (1995) support the Summer’s (1988) reverse causation proposition. This implies that a unidirectional causality running from current account to budgetary variable where the deterioration in current account deficit could worsen the budgetary position in the case of Malaysia.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 37677.
Date of creation: 2006
Date of revision:
Publication status: Published in The Journal of Global Business Management 2.2(2006): pp. 126-135
Twin deficits; Fiscal policy; Toda-Yamamoto test;
Find related papers by JEL classification:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
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