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Twin deficit in MENA countries: an empirical investigation

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  • Samia OMRANE BELGUITH

Abstract

This paper tests the relationship between current account and budget deficits in eight MENA countries using time-series data for the period 1990-2012. The paper uses cointegration analysis, error correction modelling and Granger causality test under a vector autoregression framework. The results show that the direction of causality for the MENA countries is mixed. The ï¬ ndings conï¬ rm that current account deï¬ cit causes budget deï¬ cit for Kuwait and Egypt, whereas the reverse causality is true for Saudi Arabia supporting the twin deficit hypothesis. The results show also that there is no relationship between two deficits for other countries supporting Ricadian equivalence hypothesis (REH).

Suggested Citation

  • Samia OMRANE BELGUITH, 2016. "Twin deficit in MENA countries: an empirical investigation," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 19(60), pages 123-146, June.
  • Handle: RePEc:rej:journl:v:19:y:2016:i:60:p:123-146
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    More about this item

    Keywords

    Twin deficit; Fiscal Deficit; current account deficit; granger causality;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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