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Twin Deficit Hypothesis: A Case of Pakistan

Author

Listed:
  • Yasmin, Farrah

    (The Women University Multan)

Abstract

The prime motive of this study is to scrutinize the twin deficit for annual time series data over the period 1990-2010 for Pakistan. Twin deficit hypothesis expressed that an expansion in budget deficit will ground for rise in current account deficit. To diagnose affiliation amongst couple of variables, applied Unit root test (ADF-test), Johansen cointegration technique, Impulse response function and Granger causality test. The Granger causality demonstrate that the causality direction travel from current account deficit to budget deficit. When current account deficit occurs it leads to budget deficit. So the finding proves that there is a positive connection among both variables. Investigations are most reliable for Pakistan economy. Finally, this study confirms the rapport amid current account deficit and budget deficit.

Suggested Citation

  • Yasmin, Farrah, 2015. "Twin Deficit Hypothesis: A Case of Pakistan," Sukkur IBA Journal of Management and Business, Sukkur IBA University, vol. 2(1), pages 71-84, April.
    • Handle: RePEc:ris:ibajmb:0012
    DOI: 10.30537/sijmb.v2i1.89
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    Citations

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    Cited by:

    1. Nazia Abdul Rehman & Musarrat Shamshir & Khurram Shakir, 2020. "Correlation of Macroeconomic Variables with Twin Deficit in Pakistan," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 16(1), pages 16-11.
    2. Nazia Abdul Rehman & Musarrat Shamshir & Khurram Shakir, 2020. "Correlation of Macroeconomic Variables with Twin Deficit in Pakistan," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 16(1), pages 1-16.

    More about this item

    Keywords

    Budget deficit; Current account deficit; Pakistan;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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