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Twin Deficits and Feldstein-Horioka Puzzle in the Case Iran

Author

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  • Farzane Bagheri
  • Salma Keshtkaran
  • Fatemeh Daroghe Hazrati

Abstract

The main purpose of this study is to examine the relationship between budget deficit and current account deficit in Iran's economy through twin deficits and Feldstein-Horioka puzzle. To achieve this goal, Engel-Granger and seemingly unrelated regressions are used during "1971-2007". 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 .Testing the validity of the Feldstein-Horioka puzzle indicates a low level of international capital mobility for Iran.

Suggested Citation

  • Farzane Bagheri & Salma Keshtkaran & Fatemeh Daroghe Hazrati, 2012. "Twin Deficits and Feldstein-Horioka Puzzle in the Case Iran," Journal of Social and Development Sciences, AMH International, vol. 3(5), pages 167-171, May.
    • Handle: RePEc:rnd:arjsds:v:3:y:2012:i:5:id:4012
    DOI: 10.22610/jsds.v3i5.699
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