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- Title
TWIN DEFICIT HYPOTHESIS: AN EMPIRICAL STUDY ON THE ECONOMY OF KYRGYZSTAN.
- Authors
Halil, Sugozu Ibrahim; Uulbolsun, Nurkamilova
- Abstract
The twin deficit hypothesis explains that there is a relationship between budget deficit and current account deficit. While the traditional Keynesian approach confirms this relationship, the theory of Ricardian equivalence argues that such a relationship is not available. The aim of this study is to investigate whether the twin deficit hypothesis in the Kyrgyz economy in the 1993-2021 period is valid. ARDL bounds testing approach and Toda-Yamamoto causality test were used to analyze the short and long-term relationship between budget deficit and current account deficit. As a result of these tests, it has been confirmed that there is a longterm relationship between the two deficits. According to the result of causality analysis, it was found that there was a one-way relationship from budget deficit to current account deficit. Accordingly, it was concluded that budget deficits in the Kyrgyz economy have an impact on current account deficit. This result is compatible with the traditional Keynesian approach.
- Subjects
KYRGYZSTAN; BUDGET deficits; RICARDIAN equivalence theorem; KEYNESIAN economics; EMPIRICAL research; STATISTICAL hypothesis testing
- Publication
Reforma (1694-5158), 2022, Vol 95, Issue 3, p6
- ISSN
1694-5158
- Publication type
Article