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Twin deficits phenomenon in small islands: an empirical investigation by panel data analysis

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  • Salih Turan Katırcıoglu
  • Sami Fethı
  • Meryem Duygun Fethı

Abstract

This article empirically investigates the direction of causality between current account balance and the overall budget balance of a selected 24 small island state economies by conducting panel data econometric techniques. The results of both bivariate and pairwise Granger causality tests suggest that there is unidirectional causation which runs from current account balance to the overall budget balance. On the other hand, no evidence has been obtained on the causation which runs from budget balance to current account balance in small island states.

Suggested Citation

  • Salih Turan Katırcıoglu & Sami Fethı & Meryem Duygun Fethı, 2009. "Twin deficits phenomenon in small islands: an empirical investigation by panel data analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 16(15), pages 1569-1573.
  • Handle: RePEc:taf:apeclt:v:16:y:2009:i:15:p:1569-1573
    DOI: 10.1080/13504850701578850
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    Cited by:

    1. Henryk Gurgul & Lukasz Lach, 2012. "Two deficits and economic growth: case of CEE countries in transition," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 12, pages 79-108.
    2. Alleyne, Dillon & Lugay, Beverly & Dookie, Michele, 2011. "The relationship between fiscal and current account balances in the Caribbean," Documentos de Proyectos 443, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Tosun, M. Umur & Iyidogan, Pelin Varol & Telatar, Erdinç, 2014. "The Twin Deficits in Selected Central and Eastern European Economies: Bounds Testing Approach with Causality Analysis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 141-160, June.
    4. Ahmad Zubaidi Baharumshah & Evan Lau, 2009. "Structural breaks and the twin deficits hypothesis: Evidence from East Asian countries," Economics Bulletin, AccessEcon, vol. 29(4), pages 2517-2524.
    5. Samia OMRANE BELGUITH, 2016. "Twin deficit in MENA countries: an empirical investigation," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 19(60), pages 123-146, June.

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