The twin deficits hypothesis: The case of Turkey (1998-2013)

In recent years, the topic of discussion in the literature that one of the issues is the problem of macro-economic stability. Macroeconomic stability is provided with internal and external balances are expressed as. Internal balance the budget balance, the external balance of the current account balance is taken as representing the index. In this context, the twin deficits hypothesis opinions regarding the budget and the current account deficit from 1980 to the present has been the subject of debate. Twin deficits hypothesis, budget deficits and current account deficits and a positive one-way causal relationship is considered. So in the budget balance of shocks on the current account balance has been advocated to be effective. Twin deficits hypothesis against the defending Keynesian view of the Ricardian approach that there is any relationship between these two open claim. In this study, the validity of the twin deficits hypothesis is valid between 1998(1)-2013(2) period, we try to explore. Budget deficits on the current account deficit to investigate whether the effects Johansen cointegration analysis, error correction model and Granger causality test methods were applied. According to empirical evidence suggests the twin deficits hypothesis budget deficits and current account deficits could not be reached between the positive and one-sided relationship. However, the budget deficit has a positive impact on the current account deficit has reached the conclusion. Keywords: Twin deficits hypothesis, public spending, current account deficit, budget deficit