Are the Twin or Triple Deficits Hypotheses Applicable to Post-Communist Countries?

  • Hüseyin Şen Ankara Yıldırım Beyazıt University, Faculty of Political Sciences, Department of Public Finance, Turkey
  • Ayşe Kaya İzmir Kâtip Çelebi University, Faculty of Economics and Administrative Sciences, Department of Public Finance, Turkey

Abstract

This study examines the validity of the twin or triple deficits hypotheses using bootstrap panel Granger causality analysis and an annual panel dataset of six post-communist countries (Russia, Poland, Ukraine, Romania, the Czech Republic, and Hungary) during the period from 1994 to 2015. The results corroborate neither the validity of the twin deficits hypothesis nor its extended version, the triple deficits hypothesis, for any of the sample countries. In other words, we find no Granger causal relationship between budget deficits and external (trade or current account) deficits or among budget deficits, private savings-investment deficits, and external deficits in the countries examined. On the basis of these results, we reject the Keynesian view of the twin or triple deficits hypotheses. Rather, we confirm the Ricardian view.

Keywords: 
Fiscal policy, Twin deficits, Triple deficits, Transition economies, Bootstrap panel Granger causality analysis. 

JEL: E60, F30, F32, H62.

How to Cite
Şen H., & Kaya A. (2018). Are the Twin or Triple Deficits Hypotheses Applicable to Post-Communist Countries? Panoeconomicus, Advance online publication, 1-29. doi:10.2298/PAN170721028S
Section
Original scientific paper