The validity of the triple deficit

The importance of savings and investments has been ignored in the determination of the Twin Deficit problem that emerged in the 1980's in the world. Savings and investments which are the the determinants of economic growth have gained importance with the acceleration of globalization. The same time existence of the budget deficit, saving and investment deficit which are the internal equilibrium element of the economy and the current account deficit which is the external equilibrium element of the economy is called Triple Deficit. Any imbalance in one of these indicators affecting each other will lead to deterioration of the economic stability of the countries. The first section of this study is based on Triplet Deficit Hypothesis and deals with the development of economic stability in the history of theoretical and economic thought and proposes a solution based on budget policies in the case of economic stability in detail. In the second part of the study, the balance of payments and main items of the balance of payments are introduced; then, current account balance and the approaches of the current acoount balance are listed. The third section focuses on the conceptual framework of Twin Deficit and Triplet Deficit Hypotheses and related approaches, and additionally, economic development of Turkey and OECD countries since 1980. The forth part explains the method, models and the tests used in the study. Lastly, the fifth section indicates the results of analysis. In this study, the validity of the Triplet Deficit Hypothesis is tested in the first and third models for Turkey and OECD countries by using annual data for the time period 1980-2014 while second model examines the relationship of Triplet Deficit Hypothesis and economic growth. The results of the analysis show that the Triple Deficit Hypothesis is not valid in Turkey. Furthermore, in OECD countries while in short term Triple Deficit Hypothesis is not valid, in the long term the hypothesis is valid. The results of the analysis for Turkey show that there exists causality for current account deficits and savings-investment deficits and one way causality for current account deficit and budget deficit. On the other hand, a two way causality for current account deficit and saving-investment deficit is detected for the OECD countries.