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Spatial Dynamics of the Triple Deficit Hypothesis: Empirical Evidence from EU Economies

Author

Listed:
  • Alper Akpınar

    (Ege University)

  • Mahir Tosunoğlu

    (Ege University)

Abstract

This study investigates the triple deficit hypothesis, which posits a link between the current account and fiscal and savings-investment balances, by accounting for both temporal and spatial effects. For this purpose, the analysis is carried out using the data of 27 EU countries for the period 2000-2024. The empirical findings, derived using the Spatial Autoregressive (SAR) Model, indicate a statistically significant and positive relationship between the trade balance and both the budget and savings balances. Furthermore, the spatial effect was also found to be positive and significant, suggesting that trade deficits in neighboring countries exhibit mutual influence and spatial dependence. considering these findings, the triple deficit hypothesis is validated for EU countries during the analyzed period. The evidence implies that external trade deficits are not isolated phenomena but are shaped by both domestic fiscal and savings policies and regional spillover effects.

Suggested Citation

  • Alper Akpınar & Mahir Tosunoğlu, 2025. "Spatial Dynamics of the Triple Deficit Hypothesis: Empirical Evidence from EU Economies," Bingol University Journal of Economics and Administrative Sciences, Bingol University, Faculty of Economics and Administrative Sciences, vol. 9(2), pages 287-303, December.
    • Handle: RePEc:bgo:journl:v:9:y:2025:i:2:p:287-303
    DOI: 10.33399/biibfad.1720409
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    References listed on IDEAS

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F10 - International Economics - - Trade - - - General

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