Current account and fiscal deficits: Evidence from five developing economies of Asia

Anoruo, Emmanuel; Ramchander, Sanjay

doi:10.1016/s1049-0078(99)80099-2

Cited by 80 publications

(65 citation statements)

References 15 publications

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“…In fact, there exists feedback on the causal relationship between the two variables (BD↔CAD) for Malaysia, Indonesia and the Philippines. This two-way causality between the two deficits was also found in Anoruo and Ramchander (1998) and Khalid and Teo (1999). Moreover, Khalid and Teo (1999) argued that a high correspondence between the two deficits is more likely to occur in the developing rather than the developed economies 15 .…”

Section: Cointegrationmentioning

confidence: 60%

“…The importance of the mediating variables in the twin deficits nexus is discussed in Abell (1990) and Anoruo and Ramchander (1998). The role of the dollar in causing the trade deficit is a key part of the widely accepted doctrine that links trade deficit to the US budget deficit.…”

Section: Discussionmentioning

confidence: 99%

“…The articles by Kearney and Monadjemi (1990) on OECD countries, Anoruo and Ramchander (1998) on the Philippines, India, Indonesia and Korea and Khalid and Teo (1999) on Indonesia and Pakistan support this hypothesis. Recently, Alkswani (2000) reported the reverse causation between the two deficits for Saudi Arabia.…”

Section: Relevant Literaturementioning

confidence: 90%

“…Second, to the best of our knowledge, no previous work has attempted to address the twin deficits hypothesis for the ASEAN-4 countries, with the exception of Anoruo and Ramchander (1998) and Khalid and Teo (1999) 3 . This is surprising since the size of the current account deficits in these crisis-affected countries were large.…”

Section: Introductionmentioning

confidence: 99%

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Testing Twin Deficits Hypothesis using VARs and Variance Decomposition

Baharumshah

Lau

Khalid

2006

Journal of the Asia Pacific Economy

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This paper examines the twin deficits hypothesis in Indonesia, Malaysia, the Philippines and Thailand (ASEAN-4 countries). The major findings of this paper are: (1) Long run relationships are detected between budget and current account deficits. (2) We found that the Keynesian reasoning fits well for Thailand since a unidirectional relationship exists which runs from budget deficit to current account deficit. For Indonesia the reverse causation (current account targeting) is detected while the empirical results indicate that a bidirectional pattern of causality exists for Malaysia and the Philippines. (3) We also found support for an indirect causal relationship that runs from budget deficit to higher interest rates, and higher interest rates lead to the appreciation of the exchange rate and this leads to the widening of current account deficit. (4) The results of the variance decompositions and impulse response functions suggest that the consequences of large budget and current account deficits become noticeable only over the long run.

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Section: Cointegrationmentioning

confidence: 60%

Section: Discussionmentioning

confidence: 99%

Section: Relevant Literaturementioning

confidence: 90%

Section: Introductionmentioning

confidence: 99%

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Testing Twin Deficits Hypothesis using VARs and Variance Decomposition

Baharumshah

Lau

Khalid

2006

Journal of the Asia Pacific Economy

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“…The large inflow of investment or debt accumulations affects the budgetary stance of a country and finally conducts to internal deficit. Investigations from Islam (1998), Anoruo and Ramchander (1998), Khalid and Guan (1999), Kim and Kim (2006) support the unidirectional of the link from external to internal deficits. Marinheiro's (2008) analysis has abandoned the double deficits hypothesis in maintaining of the transpose causality from external to internal deficits using the data from Egypt.…”

Section: Twin Deficits: Theoretical Framework and Empirical Literaturementioning

confidence: 80%

Internal Deficit–External Deficit Nexus in Africa: 1960-2012

Tchouassi¹,

Ngwen²

2015

IJEF

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Which among twin deficits hypothesis, twin divergence, and Ricardian's equivalence hold in a developing country?

Ncanywa

Letsoalo

2019

Journal of Public Affairs

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South Africa witnesses the perpetual increase in budget deficit that hampers its ability for inclusive economic growth while on the other hand facing trade balance instability.To realise stability in the economy and sustainable yet inclusive economic growth, the two deficits, namely, budget and trade deficits, should be closely monitored. The study examined the empirical relationship between budget deficit and trade deficit in South Africa in the postapartheid era, employing time series data from 1994 to 2016. The autoregressive distribution lag approach was employed to examine the existence of a cointegration between the set of variables, both in the short-and the long-run relationships and together with the error correction model. It was found that there is a significant and positive relationship between budget deficit and trade deficit in the short run. However, in the long run, the Ricardian's equivalence holds in South Africa. The study recommends that policies aimed at reducing budget and trade deficits should take into account inflation and aim to increase some macroeconomic variables such as fixed investment to ultimately achieve sustainable economic growth.

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Current account and fiscal deficits: Evidence from five developing economies of Asia

Cited by 80 publications

References 15 publications

Testing Twin Deficits Hypothesis using VARs and Variance Decomposition

Testing Twin Deficits Hypothesis using VARs and Variance Decomposition

Internal Deficit–External Deficit Nexus in Africa: 1960-2012

Which among twin deficits hypothesis, twin divergence, and Ricardian's equivalence hold in a developing country?

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