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Revisiting the Twin Deficit Hypothesis for the Economies of Europe

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  • Idil Uz Akdogan

    (Department of Economics, Yeditepe University, Istanbul – Turkey)

  • Hatice Kerra Geldi

    (Department of Economics, Yeditepe University, Istanbul – Turkey)

Abstract

This study presents empirical evidence linking the current account balance to its major determinants such as exchange rate, interest rate and budget balance in 7 of the EU member countries: Bulgaria, Greece, Ireland, Italy, Latvia, Portugal and Spain. Using the panel version of various cointegration tests, we find a long-run relationship between the current account and its determinants. The long-run coefficient of the interest rate is found statistically significant in all estimation techniques. On the other hand, weak evidence is found for the existence of the twin deficit hypothesis.

Suggested Citation

  • Idil Uz Akdogan & Hatice Kerra Geldi, 2013. "Revisiting the Twin Deficit Hypothesis for the Economies of Europe," The Journal of European Theoretical and Applied Studies, The Center for European Studies at Kirklareli University - Turkey, vol. 1(1), pages 53-65.
  • Handle: RePEc:kir:journl:v:1:y:2013:i:1:p:53-65
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    References listed on IDEAS

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    Cited by:

    1. Konstantinos P. Panousis & Minoas Koukouritakis, 2020. "Twin Deficits: Evidence From Portugal, Italy, Spain and Greece," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(5), pages 332-338, September.
    2. Mehmet BÖLÜKBAŞ & Mehmet Hanefi TOPAL & Hakan HOTUNLUOĞLU, 2018. "Testing Twin Deficits Hypothesis for Eu-27 and Turkey : A Panel Granger Causality Approach under Cross-sectional Dependence," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 101-119, December.

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