Affiliation:
1. KARADENİZ TEKNİK ÜNİVERSİTESİ, İKTİSADİ VE İDARİ BİLİMLER FAKÜLTESİ, İKTİSAT BÖLÜMÜ
Abstract
The budget deficit causing an increase in the current account deficit is named twin deficits. In addition, the budget and current account balances represent the internal and external balance of the economy. As in many developed and developing countries, revealing the relationship between internal and external imbalances in the Turkish economy in terms of determining economic policies is very important. Most of the studies on twin deficits in the literature are based on analyzes with linear models. The aim of this study, unlike other studies in the literature, is to examine the relationship between the budget and current account balance in the Turkish economy with non-linear time series analysis. For this purpose, nonlinear unit root and cointegration tests were applied to the data covering the period 1994-2021. The findings show that the negative reverse causality hypothesis is valid instead of the twin deficits hypothesis in the Turkish economy in the analyzed period. Accordingly, there is a negative relationship from the current account balance to the budget balance in both the long and short run.
Publisher
International Journal of Economics and Administrative Studies
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