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Causality tests of the relationship between the twin deficits

Author

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  • Eugene Kouassi
  • Mbodja Mougoué
  • Kern O. Kymn

Abstract

We re-examine the causality between the twin deficits by testing for Granger non-causality between BD and CAD based on extended causality tests initially developed by Toda and Yamamoto (1995). Using international data from a sample of twenty developed and developing countries, we find evidence of causality (unidirectional or bi-directional) between the twin deficits for some developing countries. However, the results for developed countries are less persuasive. The empirical findings of this study are robust to alternative and independent causality testing procedures. Copyright Springer-Verlag 2004

Suggested Citation

  • Eugene Kouassi & Mbodja Mougoué & Kern O. Kymn, 2004. "Causality tests of the relationship between the twin deficits," Empirical Economics, Springer, vol. 29(3), pages 503-525, September.
    • Handle: RePEc:spr:empeco:v:29:y:2004:i:3:p:503-525
    DOI: 10.1007/s00181-003-0181-5
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    Keywords

    Granger non-causality; likelihood ratio; wald; and Lagrange multiplier tests; alternative tests; twin deficits; international evidence; C20; C22;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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