TITLE:
Relevance of Twin Deficit Hypotheses: An Econometric Analysis with Reference to India
AUTHORS:
Suresh K.G., Vikas Gautam
KEYWORDS:
Current Account Deficit, Fiscal Deficit, Granger-Causality Test, Cointegration Test
JOURNAL NAME:
Theoretical Economics Letters,
Vol.5 No.2,
April
22,
2015
ABSTRACT: Current study examines the relevance of twin deficit
hypothesis in Indian context by considering the endogenously determined
structural breaks in both unit root and cointegration tests. The cointegration
analysis shows that there is no long term relationship between the study
variables. But the Granger causality test results indicate that bidirectional
granger causality is running between the variables. Results showed no long run
relationship between the variables; twin divergence in the long run, while in
the short term, variables are related. The findings of the study are based on
data for the period 1973-1974 to 2013-2014.