The Relationship between the Government Budget Deficit and the Current Account Deficit in Saudi Arabia: Testing for Cointegration and Causality

2000 ◽  
Vol 14 (1) ◽  
pp. 41-52
Author(s):  
HAMAD AL-TWAIGRI
Keyword(s):  
Saudi Arabia ◽  
Current Account ◽  
Budget Deficit ◽  
Current Account Deficit ◽  
Government Budget ◽  
The Government ◽  
The Relationship ◽  
Government Budget Deficit ◽  
The Current Account

scholarly journals The Twin Deficits Phenomenon: Evidence from Pakistan

2000 ◽  
Vol 39 (4II) ◽  
pp. 535-550 ◽  
Author(s):  
Anjum Aqeel ◽  
Mohammed Nishat
Keyword(s):  
Fiscal Policy ◽  
Current Account ◽  
Budget Deficit ◽  
Current Account Deficit ◽  
Theoretical Work ◽  
Current Account Balance ◽  
Improved Performance ◽  
Necessary And Sufficient ◽  
The Relationship ◽  
The Current Account

Like most developing countries a steady budget deficit in Pakistan is the primary cause of all major ills of the economy. It has varied between 5.4 to 8.7 percent during last two decades. On the other hand the current account deficit varied between 2.7 to 7.2 percent during the same period. The variations in fiscal policy can lead to predictable developments in an open economy’s performance on current account, remains a controversial issue. An important aspect of this issue concerns what is termed as twin deficit analysis, according to which fiscal deficits and current account balances are very closely related so that reductions in the former are both necessary and sufficient to obtain improved performance in the later. Theoretical work on the relationship that exist between variations in fiscal policy and the current account balance has been based upon two types of models. These models are constructed from postulated behavioural relationships that purport to describe how the economy works in aggregate without explaining the behaviour of agents who make up the economy [Mundel (1963); Branson (1976); Dornbusch (1976); Kawai (1985) and Marston (1985)]. The second type of model, derives the important macroeconomic relationships from the microfoundations of individual optimising behaviour [Dixit (1978); Neary (1980); Obstfeld (1981); Persson (1982); Kimbrough (1985); Frenkel and Razin (1986); Cuddington and Vinals (1985, 1986a) and Moore (1989)]. However, both of these approaches have yielded divergent results.

Fiscal Deficit and Economic Growth in Bangladesh

2016 ◽  
Vol 62 (1) ◽  
pp. 31-42 ◽  
Author(s):  
Ebney Ayaj Rana ◽  
Abu N. M. Wahid
Keyword(s):  
Economic Growth ◽  
Budget Deficit ◽  
Negative Impact ◽  
Political Stability ◽  
Ordinary Least Squares ◽  
Policy Implications ◽  
Government Budget ◽  
The Government ◽  
The Impact ◽  
Government Budget Deficit

The economy of Bangladesh is currently going through a period of continuous budget deficit. The present data suggest that the government budget deficit, on average, is nearly 5% of the country’s GDP. This has been true since the early 2000s. To finance this deficit, governments have been borrowing largely from domestic and foreign sources resulting in inflationary pressure on one hand, and crowding out of private investments on the other. During the same period, although the economy has grown steadily at a rate of more than 6%, this growth is less than the potential. This article presents an econometric study of the impact of government budget deficits on the economic growth of Bangladesh. We conduct a time-series analysis using ordinary least squares estimation, vector error correction model, and granger causality test. The findings suggest that the government budget deficit has statistically significant negative impact on economic growth in Bangladesh. Policy implications of our findings include reestablishing the rule of law, political stability in the country, restructuring tax structure, closing tax loopholes, and harmonizing fiscal policy with monetary policy to attract additional domestic and foreign investment.

scholarly journals Analyzing the Effects of Globalization on the Government Budget Deficit: The Matching Approach

2019 ◽  
Vol 10 (1) ◽  
pp. 65-96
Author(s):  
Seyed Komeil Tayebi ◽  
Alireza Kamalian ◽  
Ali Sarkhosh Sara ◽  
Mostafa Mobini Dehkordi
Keyword(s):  
Budget Deficit ◽  
Government Budget ◽  
The Government ◽  
Government Budget Deficit

Twin deficits hypothesis in Bangladesh: an empirical investigation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sima Rani Dey ◽  
Mohammad Tareque
Keyword(s):  
Current Account ◽  
Budget Deficit ◽  
Good Governance ◽  
Current Account Deficit ◽  
Trade Deficit ◽  
Fiscal Deficit ◽  
Twin Deficits ◽  
Content Type ◽  
Long Run ◽  
The Current Account

PurposeThis study attempts to examine the twin deficits hypothesis for Bangladesh. Along with the traditional twin deficits hypothesis associated with the current account and fiscal deficit, the paper also explores the causal relationship between the trade deficit and fiscal deficit.Design/methodology/approachWe start with the investigation of the conventional twin deficit hypothesis employing autoregressive distributed lag (ARDL) bounds testing approach in a multivariate framework. Due to the absence of cointegration between the budget deficit and trade deficit, the study adopts a multivariate vector autoregressive (VAR) model to analyze the nexus.FindingsThe study supports the presence of the twin deficits hypothesis in Bangladesh, both in the short run and long run. Unidirectional causation running from the budget deficit to the current account deficit in the long run. The trade model also supports the twin deficit hypothesis, like the aforementioned current account model.Practical implicationsTherefore, the sustainable fiscal deficit is the key to maintain a stable current account deficit and trade deficit in Bangladesh.Originality/valueThe study incorporates the country risk indicators to address the governance issue while analyzing the models' deficit scenarios because good governance is an integral part of explaining the development outcome and failure of a country like Bangladesh.

scholarly journals THE EFFECT OF MACROECONOMIC VARIABLES ON FISCAL SUSTAINABILITY IN INDONESIA, PERIOD 2004Q1-2018Q4

2020 ◽  
Vol 1 (2) ◽  
pp. 61
Author(s):  
Muhammad Latif Abdullah ◽  
FNU Sunaryati
Keyword(s):  
Budget Deficit ◽  
Foreign Debt ◽  
Fiscal Sustainability ◽  
Series Data ◽  
Government Budget ◽  
Macroeconomic Variables ◽  
Domestic Debt ◽  
The Government ◽  
The Impact ◽  
Government Budget Deficit

Abstract Fiscal sustainability illustrates the condition of a healthy government budget which can finance government spending without increasing debt supply. The purpose of this study is to analyze the impact of macroeconomic variables on fiscal sustainability which in this study fiscal sustainability is proxied as a government budget deficit. The data used in this study is the 2004Q1-2018Q4 time series data using the Vector Error Correction Model (VECM). The results showed that fiscal conditions in Indonesia are sustainable and macroeconomic variables such as domestic debt andinflation has a positive effect on increasing the government budget deficit. Whereas the variable state revenues and foreign debt negatively affect the government budget deficit.Keywords : Fiscal Sustainability, Government Budget Deficit, Domestic Debt, Foreign Debt.

scholarly journals Analysing the Relationship between Budget Deficit and Current Account Deficit in Namibia

2020 ◽  
pp. 35-43
Author(s):  
Achiles Shifidi ◽  
Jacob M. Nyambe
Keyword(s):  
Causal Relationship ◽  
Current Account ◽  
Budget Deficit ◽  
Time Series Data ◽  
Current Account Deficit ◽  
Impulse Response Function ◽  
Transmission Mechanism ◽  
Series Data ◽  
Current Account Balance ◽  
The Government

Is there a causal relationship between budget deficit and current account deficit? This study attempts to explain the significance of the transmission mechanism, (the exchange rate and interest rate) in explaining the twin deficit hypothesis (i.e. budget deficit and current account deficit) in Namibia. The study employed analytical methods of unit roots, cointegration, Granger-causality, and the impulse response function for estimation. In contributing to this ongoing debate, the study used the case of Namibia over the period spanning from 1990-2014 using time series data. Budget deficit and current account deficit proved to be significant. There is a unidirectional causal relationship between budget deficit and current account deficit in Namibia which runs from current account deficit to budget deficit. However, the transmission mechanism proved to be less significant in explaining the twin deficit hypothesis in Namibia.  Having found a positive relationship between current account deficit and budget deficit in Namibia, the government should consider curbing the increasing current account balance as a way of reducing its adverse effect on the budget balance. From this study, it is indicated that stabilising the current account deficit problem could assist in managing the budget deficit problem in Namibia.

scholarly journals Twin Deficits and Feldstein-Horioka Puzzle in the Case Iran

2012 ◽  
Vol 3 (5) ◽  
pp. 167-171 ◽  
Author(s):  
Farzane Bagheri ◽  
Fatemeh Daroghe Hazrati .
Keyword(s):  
Current Account ◽  
Capital Mobility ◽  
Budget Deficit ◽  
Current Account Deficit ◽  
International Capital ◽  
Twin Deficits ◽  
International Capital Mobility ◽  
Long Run ◽  
Causality Relationship ◽  
The Relationship

The main purpose of this study is to examine the relationship between budget deficit and current account deficit in Iran's economy through twin deficits and Feldstein-Horioka puzzle. To achieve this goal, Engel-Granger and seemingly unrelated regressions are used during "1971-2007". The results indicate that there exists a long run equilibrium link between budget deficit and current account deficit. There is a one–way causality relationship from the budget deficit toward the current account deficit .Testing the validity of the Feldstein-Horioka puzzle indicates a low level of international capital mobility for Iran.

scholarly journals Testing for Twin Deficits and Ricardian Equivalence Hypotheses: Evidence from Iran

2012 ◽  
Vol 3 (3) ◽  
pp. 77-84 ◽  
Author(s):  
Farzane Bagheri ◽  
Salma Keshtkaran .
Keyword(s):  
Current Account ◽  
Budget Deficit ◽  
Current Account Deficit ◽  
Ricardian Equivalence ◽  
Twin Deficits ◽  
Long Run ◽  
Causality Tests ◽  
Causality Relationship ◽  
The Relationship ◽  
Casual Relationship

The main purpose of this study is to examine the relationship between budget deficit and current account deficit in Iran from 1971 to 2007. Twin deficits, which argues that a larger budget deficit leads to an expanded current account deficit, and Ricardian equivalence hypothesis, which states that there is no casual relationship between these two deficits, are examined for this purpose. To achieve this goal, Johansen co-integration and Granger causality tests are used for the period under study. The results indicate that there exists a long run equilibrium link between budget deficit and current account deficit. There is a one-way causality relationship from the budget deficit toward the current account deficit.

IMF bailout would force Pakistan’s Khan to compromise

2018 ◽  
Keyword(s):  
Saudi Arabia ◽  
Welfare State ◽  
Current Account ◽  
Budget Deficit ◽  
Prime Minister ◽  
Current Account Deficit ◽  
Fiscal Year ◽  
Content Type ◽  
The Us ◽  
Us Government

Subject Pakistan's likely need for an IMF bailout. Significance Prime Minister Imran Khan, sworn in earlier this month, came to power promising to create an ‘Islamic welfare state’. In the fiscal year ending June 2018, the current account deficit was nearly 6% of GDP and the budget deficit nearly 7% of GDP. Pakistan in September 2016 completed a three-year Extended Fund Facility programme with the IMF worth some 6.6 billion dollars, and in the last month has availed of loans worth 2.0 billion dollars from China and 4.0 billion dollars from Saudi Arabia. Impacts The US government will issue further warnings against an IMF bailout being used to pay off Pakistan’s debt to China. The revival of ties between Pakistan and Saudi Arabia may hinder Islamabad’s efforts to improve ties with Tehran. Khan’s governing coalition will be relatively stable, fewer constituent parties reducing the risk of splits, and the opposition divided.

Sign in / Sign up

Export Citation Format

Share Document