Ferda, HALICIOGLU and Kasim, EREN (2013): Testing Twin Deficits and Saving-Investment Nexus in Turkey.
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Abstract
This paper provides fresh evidence on the validity of twin deficit and the Feldstein-Horioka hypotheses for Turkey during the period of 1987-2004 using bounds testing approach to cointegration. In order to explain the main determinants of the current account deficits in the long-run, the fiscal balance and the domestic investments are used in an econometric model.The cointegration tests indicate the presence of a long-run relationship between the current account and budget deficits as well as the domestic investments during the estimation period. As a result, it is concluded that the twin deficit hypothesis and the Feldstein-Horioka puzzle are present and Turkey appeared to be integrated in the world capital market with a low degree of capital mobility as less than 1/5 of its domestic investment is financed through external funds. The augmented Granger-causality tests suggest no causality between the current account and budget deficits, both in the short-run and the long-run. The post-sample variance decompositions suggest that the domestic investments are the main cause of current deficits in the long-run. The paper also discusses the policy implications of the empirical results.
Item Type: | MPRA Paper |
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Original Title: | Testing Twin Deficits and Saving-Investment Nexus in Turkey |
English Title: | Testing Twin Deficits and Saving-Investment Nexus in Turkey |
Language: | English |
Keywords: | twin deficits, Feldstein-Horioka hypotheses, cointegration, Turkey |
Subjects: | C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration |
Item ID: | 50098 |
Depositing User: | Ferda HALICIOGLU |
Date Deposited: | 24 Sep 2013 12:28 |
Last Modified: | 27 Sep 2019 16:46 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/50098 |