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The Twin Deficits in Selected Central and Eastern European Economies: Bounds Testing Approach with Causality Analysis

  • Tosun, M. Umur


    (Department of Public Finance, Hacettepe University, Ankara, Turkey)

  • Iyidogan, Pelin Varol


    (Department of Public Finance, Hacettepe University, Ankara, Turkey)

  • Telatar, Erdinç


    (Okan University, Department of Banking and Finance, Istanbul,Turkey)

Registered author(s):

    The aim of our paper is to explore empirically the existence of the long-run relationship and the direction of causality between the budget and current account deficits for some selected Central and Eastern European economies. Bulgaria, Latvia, Lithuania, Poland, Romania, Serbia and Slovenia are the sample countries. The empirical analysis hinges on the Pesaran, Shin, and Smith (2001) bounds testing approach to co-integration and Granger non-causality. No evidence in favor of twin deficits hypothesis has been obtained for the selected countries, except for Bulgaria, as the results support non-causality.

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    Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

    Volume (Year): (2014)
    Issue (Month): 2 (June)
    Pages: 141-160

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    Handle: RePEc:rjr:romjef:v::y:2014:i:2:p:141-160
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