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Twin Deficits or Ricardian Equivalence? Empirical Evidence in the APEC Countries

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  • Cosimo Magazzino

Abstract

The paper analyses the relationship between trade balance and government budget for the APEC countries over the 1980-2013 years. Using a panel data techniques, a 2-variable VAR is estimated. Empirical findings show that for the whole APEC members as well as for the ASEAN sub-sample a bi-directional causality is discovered, while for the American sub-sample the Neo-classical view holds. Moreover, the forecast errors decompositions seem confirm this analysis. Cointegration tests reveal the existence of a long-run relationship between these two variables, with most of the coefficients close to 1, although several ASEAN countries represent exceptions. Finally, causality analyses show that ten countries exhibit the absence of any causal relationship, in line with neutrality Ricardian hypothesis.

Suggested Citation

  • Cosimo Magazzino, 2017. "Twin Deficits or Ricardian Equivalence? Empirical Evidence in the APEC Countries," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 7(10), pages 959-971.
    • Handle: RePEc:asi:aeafrj:v:7:y:2017:i:10:p:959-971:id:1609
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    Cited by:

    1. Georgios Karras, 2019. "Are “twin deficits” asymmetric? Evidence on government budget and current account balances, 1870–2013," International Economics, CEPII research center, issue 158, pages 12-24.
    2. Dhyani Mehta & Valentina V. Derbeneva, 2023. "Asymmetry Effect of Tax and Public Debt on Private Consumption Spending in Russia," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 9(3), pages 359-375.
    3. Nurudeen Abu & Awadh Ahmed Mohammed Gamal, 2020. "An Empirical Investigation of the Twin Deficits Hypothesis in Nigeria: Evidence from Cointegration Techniques," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 14(3), September.
    4. Piotr Bartkiewicz, 2020. "Quantitative Easing: New Normal or Emergency Measure?," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 14(3), September.
    5. 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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