Relevance of twin deficit hypothesis in the presence of structural breaks: an evidence from Pakistan
Pakistan experienced consistent rise in budget deficit and current account deficit that dampened the country’s abilities to achieve sustained economic growth over the last several years. To this aim, this study intends to investigate the existence of twin deficit hypothesis in the presence structura...
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| Veröffentlicht in: | Quality & quantity 2023-08, Vol.57 (4), p.3305-3320 |
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| creator | Shah, Syed Sadaqat Ali Jadoon, Sarmad Afridi, Muhammad Asim |
| description | Pakistan experienced consistent rise in budget deficit and current account deficit that dampened the country’s abilities to achieve sustained economic growth over the last several years. To this aim, this study intends to investigate the existence of twin deficit hypothesis in the presence structural breaks over the last four decades. Utilizing time series data for the years 1980–2019 and employing Zivot-Andrew unit root test, ADF, PP and ARDL approaches, we find that budget deficit being statistically significant in the short-run and long-run positively affect the current account deficit of the country. The effects are unaltered when we run regression with structural break and without structural breaks. The study, thus, confirms the presence of twin deficit hypothesis in both the short-run and long-run periods in case of Pakistan. Thus, a consistent, well devised and prudent fiscal policy help alleviate the current account deficit of Pakistan over the last four decades. |
| doi_str_mv | 10.1007/s11135-022-01511-9 |
| format | Article |
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To this aim, this study intends to investigate the existence of twin deficit hypothesis in the presence structural breaks over the last four decades. Utilizing time series data for the years 1980–2019 and employing Zivot-Andrew unit root test, ADF, PP and ARDL approaches, we find that budget deficit being statistically significant in the short-run and long-run positively affect the current account deficit of the country. The effects are unaltered when we run regression with structural break and without structural breaks. The study, thus, confirms the presence of twin deficit hypothesis in both the short-run and long-run periods in case of Pakistan. 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| subjects | Budget deficits Causality Developing countries Econometrics Economic growth Fiscal policy Foreign exchange rates GDP Gross Domestic Product Hypotheses Inflation Interest rates LDCs Methodology of the Social Sciences Social Sciences Time series |
| title | Relevance of twin deficit hypothesis in the presence of structural breaks: an evidence from Pakistan |
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