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Testing for Twin Deficits and Ricardian Equivalence Hypotheses: Evidence from Iran

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  • Farzane Bagheri
  • Salma Keshtkaran

Abstract

The main purpose of this study is to examine the relationship between budget deficit and current account deficit in Iran from 1971 to 2007. Twin deficits, which argues that a larger budget deficit leads to an expanded current account deficit, and Ricardian equivalence hypothesis, which states that there is no casual relationship between these two deficits, are examined for this purpose. To achieve this goal, Johansen co-integration and Granger causality tests are used for the period under study. The results indicate that there exists a long run equilibrium link between budget deficit and current account deficit. There is a one-way causality relationship from the budget deficit toward the current account deficit.

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  • Farzane Bagheri & Salma Keshtkaran, 2012. "Testing for Twin Deficits and Ricardian Equivalence Hypotheses: Evidence from Iran," Journal of Social and Development Sciences, AMH International, vol. 3(3), pages 77-84.
    • Handle: RePEc:rnd:arjsds:v:3:y:2012:i:3:p:77-84
    DOI: 10.22610/jsds.v3i3.688
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    2. Bernardin Senadza & Godson Korbla Aloryito, 2016. "The twin deficits hypothesis: Evidence from Ghana," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 9(3), pages 55-62, December.
    3. Sarah El-Khishin & Jailan El-Saeed, 2021. "The Twin Deficit Hypothesis in the MENA Region: Do Geopolitics Matter?," Economies, MDPI, vol. 9(3), pages 1-17, September.
    4. 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.
    5. Tjon Kie Sim-Balker, Peggy & Mungroo, Albert & Piqué-Lont, Natalie & Ooft, Gavin, 2014. "Twin Deficits in Suriname: An Empirical Analysis," EconStor Preprints 215532, ZBW - Leibniz Information Centre for Economics.
    6. 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.

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