Analysis by VAR of the Relationship between Exchange Rate, Budget Deficit, and Current Account Deficit: Case of Morocco

2017 ◽  
Author(s):  
Aziz Bensbahou ◽  
Mohamed Lakhdar
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
Budget Deficit ◽  
Current Account Deficit ◽  
The Relationship

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.

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.

scholarly journals The Relationship Between the Budget Deficit and Current Account Deficit in Turkey

2014 ◽  
Vol 3 (3) ◽  
pp. 81-86 ◽  
Author(s):  
Seyfettin Erdoğan ◽  
Durmuş Çağrı Yıldırım
Keyword(s):  
Economic Policy ◽  
Current Account ◽  
Budget Deficit ◽  
Current Account Deficit ◽  
The Other ◽  
Current Account Balance ◽  
Policy Makers ◽  
Negative Effect ◽  
The Relationship

One of the most debated topics in Economics literature is the relation between budget deficit and current account deficit. The data obtained from the presence of this kind of relation is leading for policy makers in terms of determining the quality of the policy to be preferred and the economic policy to be pursued. In this study, the relation between budget deficit and current account deficit in Turkey is analyzed for 2001Q2-2012Q2 period. According to the data obtained, budget deficit has negative and statistically meaningful effect on current account balance. On the other hand, budget deficit has negative effect on current account balance in short terms.

scholarly journals FLEKSIBILITAS NILAI TUKAR DAN PENYESUAIAN TRANSAKSI BERJALAN DI INDONESIA: ANALISIS THRESHOLD VAR

2018 ◽  
Vol 4 (2) ◽  
pp. 112-139
Author(s):  
Farhana Zahrotunnisa ◽  
Iman Sugema ◽  
Toni Bakhtiar
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
Current Account Deficit ◽  
Exchange Rate Regime ◽  
Exchange Rate Flexibility ◽  
Exchange Rate Variability ◽  
Monetary Authorities ◽  
Actual Exchange ◽  
The Relationship ◽  
Current Account Adjustment

Estimation study about the relationship between exchange rate flexibility and current account adjustment has been through three stages, the first stage was analysis of correlation among exchange rates variability (proxied by REER and NEER) and exchange rate regimes classification. The second step was estimating the relationship that the former was mentioned with VAR as benchmark model. The third step was applying the nonlinear estimation with Threshold VAR. The results of analysis showed that exchange rate regime classification may not capture actual exchange rate variability and flexibility exchange rate can accelerate current account adjustment in Indonesia if the changes of Indonesia exchange rate less than 27.7059 (low regime) whereas in high regime exchange rate is persistent increasing so that the system between exchange rate and current account become unstable. Bank Indonesia as monetary authorities must keep the changes of exchange rate less than 27.7059, due to exchange rate can affect current account adjustment, so can anticipate if there is current account deficit in Indonesia economy.  Keywords : Exchange Rate Flexibility, Current Account Adjustment, Exchange Rate Regime, Classification, Threshold VAR

scholarly journals FLEKSIBILITAS NILAI TUKAR DAN PENYESUAIAN TRANSAKSI BERJALAN DI INDONESIA: ANALISIS THRESHOLD VAR

2018 ◽  
Vol 4 (2) ◽  
pp. 112-139
Author(s):  
Farhana Zahrotunnisa ◽  
Iman Sugema ◽  
Toni Bakhtiar
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
Current Account Deficit ◽  
Exchange Rate Regime ◽  
Exchange Rate Flexibility ◽  
Exchange Rate Variability ◽  
Monetary Authorities ◽  
Actual Exchange ◽  
The Relationship ◽  
Current Account Adjustment

Estimation study about the relationship between exchange rate flexibility and current account adjustment has been through three stages, the first stage was analysis of correlation among exchange rates variability (proxied by REER and NEER) and exchange rate regimes classification. The second step was estimating the relationship that the former was mentioned with VAR as benchmark model. The third step was applying the nonlinear estimation with Threshold VAR. The results of analysis showed that exchange rate regime classification may not capture actual exchange rate variability and flexibility exchange rate can accelerate current account adjustment in Indonesia if the changes of Indonesia exchange rate less than 27.7059 (low regime) whereas in high regime exchange rate is persistent increasing so that the system between exchange rate and current account become unstable. Bank Indonesia as monetary authorities must keep the changes of exchange rate less than 27.7059, due to exchange rate can affect current account adjustment, so can anticipate if there is current account deficit in Indonesia economy.  Keywords : Exchange Rate Flexibility, Current Account Adjustment, Exchange Rate Regime, Classification, Threshold VAR

scholarly journals The Relationship between Current Account Deficits and Growth in Montenegro: ARDL Bounds Testing Approach

2018 ◽  
Vol 7 (3) ◽  
pp. 5-24 ◽  
Author(s):  
Mustafa Özer ◽  
Jovana Žugić ◽  
Sonja Tomaš-Miskin
Keyword(s):  
Growth Rate ◽  
Current Account ◽  
Current Account Deficit ◽  
Gdp Growth ◽  
Bounds Testing ◽  
Current Account Deficits ◽  
Long Run ◽  
Gdp Growth Rate ◽  
Short Run ◽  
The Relationship

Abstract In this study, we investigate the relationship between current account deficits and growth in Montenegro by applying the bounds testing (ARDL) approach to co-integration for the period from the third quarter of 2011 to the last quarter of 2016. The bounds tests suggest that the variables of interest are bound together in the long run when growth is the dependent variable. The results also confirm a bidirectional long run and short run causal relationship between current account deficits and growth. The short run results mostly indicate a negative relationship between changes in the current account deficit GDP ratio and the GDP growth rate. This means that any increase of the value of independent variable (current account deficit GDP ratio) will result in decrease of the rate of GDP growth and vice versa. The long-run effect of the current account deficit to GDP ratio on GDP growth is positive. The constant (β0) is positive but also the (β1), meaning that with the increase of CAD GDP ratio of 1 measuring unit, the GDP growth rate would grow by 0,5459. This positive and tight correlation could be explained by overlapping structure of the constituents of CAD and the drivers of GDP growth (such as tourism, energy sector, agriculture etc.). The results offer new perspectives and insights for new policy aiming for sustainable economic growth of Montenegro.

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