Twin Deficits Hypothesis and capital Mobility: The ASEAN-5 Perspective

doi:10.17576/pengurusan-2009-29-02

Cited by 12 publications

(2 citation statements)

References 31 publications

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“…Also, there exist a wide collection of studies that find a bi-directional causality between both deficits [4,14,24,25,27]. At last, other inquiries validate the Ricardian equivalence hypothesis of non causality between the two deficits [8,11,16,22,26].…”

Section: Brief Empirical Literature Reviewmentioning

confidence: 99%

Empirical Analyses of the Relationship between Trade and Budget Deficit of FYR of Macedonia

Sadiku¹,

Bexheti²,

Bexheti³

et al. 2018

KSS

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The purpose of this article is to analyze the evidence of twin deficits hypothesis by empirically examining the relationship between trade deficit and budget deficit for the case of FYR of Macedonia. The study employs a vector autoregression (VAR) model as well as a Granger causality test in order to investigate the causal relationship between trade and budget deficit variables using quarterly data for the time period 1998Q1–2017Q4. The econometric results of VAR model disclose that there exists a short term relationship between these two variables, implying that higher trade deficits are associated with higher fiscal deficits. Moreover, the causality test shows a unidirectional relationship, revealing that trade deficit causes budget deficit, whereas budget deficit doesn't cause trade deficit. Keywords: trade deficit, budget deficit, causality analysis

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Section: Brief Empirical Literature Reviewmentioning

confidence: 99%

Empirical Analyses of the Relationship between Trade and Budget Deficit of FYR of Macedonia

Sadiku¹,

Bexheti²,

Bexheti³

et al. 2018

KSS

View full text Add to dashboard Cite

show abstract

“…The current account balance is measured as a percentage of the GDP. Furthermore, Baharumshah et al (2009) stated that fiscal balance is important as it indicates the long-term economic progress of the nation. The fiscal balance is the net amount between government revenues and government expenditures and is measured as the percentage of GDP.…”

Section: Data Descriptionsmentioning

confidence: 99%

Public Debt, Current Account Balance, and Fiscal Balance: The Threshold Effects in Selected ASEAN Countries

Soo

Ab-Rahim

Yau

2023

BER

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Indebtedness is a huge global issue faced by all economies around the world since the older time until today. The high and increasing debt levels have become a concern, and public debt has become the core of the turmoil that began a few years ago. When the government's spending in a year exceeds its revenue, there will be a budget deficit for that fiscal year. Hence, it must use debt to fill the funding gap. This situation creates an annual deficit, which cannot end until the accumulated debt becomes unsustainable and the government's finances collapse. Hence, this study is aimed to assess the impact of the public debt threshold on current account balance and fiscal balance in selected ASEAN countries (Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam) by adopting annual data from 1990 to 2021. In panel long run estimation by pooled mean group (PMG) estimator, public debt affects twin balances to have a positive relationship. In the empirical analysis, the single threshold sample splitting model is employed to assess the impact of the public debt threshold on the current account balance and fiscal balance either below or above the threshold level. The outcomes indicate that the public debt threshold level is at 63.36%. When the public debt threshold is below 63.36%, there is a negative relationship between the current account balance and fiscal balance; whereas when the public debt threshold is higher than 63.36%, there is positive nexus between the current account balance and fiscal balance. This result implies the situation of twin divergence situation when exceeding the public debt threshold level.

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Revisiting Feldstein–Horioka Puzzle: Evidence from SAARC Economies

Mishra

2020

The Indian Economic Journal

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In the macroeconomic perspective, domestic saving and investment constitute two important wheels that keep the growth process moving on towards stability. But when domestic savings tend to fly away to foreign countries for excess returns, the warranted domestic investment remains unattained thereby which impair the growth trend unless the gap is bridged by the foreign investment inflows. However, excess inflows of foreign investments may deteriorate current account balances, if not appropriately absorbed. In this pretext, this article revisited the Feldstein–Horioka puzzle with the twin-deficit hypothesis for SAARC countries. The results lend to support the validity of the twin-deficit hypothesis along with a low degree of association between domestic savings and investment in the region thereby justifying the argument that international capital movements or financial integration have increased in the post-reform era. This observation has significant policy implications for the sustained growth of the SAARC nations.

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Twin Deficits Hypothesis and capital Mobility: The ASEAN-5 Perspective

Cited by 12 publications

References 31 publications

Empirical Analyses of the Relationship between Trade and Budget Deficit of FYR of Macedonia

Empirical Analyses of the Relationship between Trade and Budget Deficit of FYR of Macedonia

Public Debt, Current Account Balance, and Fiscal Balance: The Threshold Effects in Selected ASEAN Countries

Revisiting Feldstein–Horioka Puzzle: Evidence from SAARC Economies

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