Triple Deficit or Twin Divergence: A Dynamic Panel Analysis

Özet

Triple deficit hypothesis points out coexistence of budget deficit, current account deficit and private-savings deficits. In the literature, in terms of Keynesian and Ricardian approach, existing of budget deficit and current account deficit and the relationship between them are widely examined. The literature on three deficits which develops twin deficit hypothesis by involving private sector saving gaps is limited. Moreover, the problems about political economy of three deficits that occur with fragility of transition economies lay on rather wide area. Our study aims to examine three deficit hypothesis for 24 transition economies over 2002-2013 period by employing dynamic panel data analysis. We find evidence of an interaction between current account deficit and savings-investment deficit.