The relationship between Budget Deficits and Current Account
Part of : Αρχείον οικονομικής ιστορίας ; Vol.XII, No.1-2, 2001, pages 57-76
Issue:
Pages:
57-76
Author:
Abstract:
This paper employs cointegration analysis, error correction modelling and Granger causality to explore the relationship between budget and trade deficits using annual data from a developing economy.The main purpose of the paper is to test the validity of the Keynesian proposition and the Ricardian equivalence theorem. The empirical evidence suggests a predominantly unidirectional causality from budget deficit to trade balance in the long and short run. The various specification and diagnostic tests appear significant and robust, indicating the consistency of the empirical framework of the Keynesian proposition.
Subject:
Subject (LC):
