An Empirical Investigation of Budget and Trade Deficits: The Case of Bangladesh
This study attempts to investigate the evidence of twin deficits hypothesis, that is, the simultaneous existence of fiscal and foreign trade account deficits in Bangladesh. In this regard this paper examines the causal relationship between budget deficit and trade deficit based on annual time series...
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doaj-1023e90240da4e30b304b2f758fd8a582020-11-25T01:42:35ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382013-09-01335705791032An Empirical Investigation of Budget and Trade Deficits: The Case of BangladeshAsrafuzzaman .Amit RoySanat Das GuptaThis study attempts to investigate the evidence of twin deficits hypothesis, that is, the simultaneous existence of fiscal and foreign trade account deficits in Bangladesh. In this regard this paper examines the causal relationship between budget deficit and trade deficit based on annual time series data from 1972-73 to 2011-12 fiscal year. Applying the VAR and Granger Causality after successfully running ADF and PP unit root test and cointegration rank test this paper reveals that budget deficit Granger cause trade deficit and vice versa but the relationship does not stand for the long-run dynamics. In fact, the long run relationship depends on overall macroeconomic environment and performances of other relevant variables. Policy implication is that Government should reduce budget deficit to improve the trade account balance.https://dergipark.org.tr/tr/pub/ijefi/issue/31958/351936?publisher=http-www-cag-edu-tr-ilhan-ozturktwin deficits bangladesh budget deficit trade deficit granger causality var |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Asrafuzzaman . Amit Roy Sanat Das Gupta |
spellingShingle |
Asrafuzzaman . Amit Roy Sanat Das Gupta An Empirical Investigation of Budget and Trade Deficits: The Case of Bangladesh International Journal of Economics and Financial Issues twin deficits bangladesh budget deficit trade deficit granger causality var |
author_facet |
Asrafuzzaman . Amit Roy Sanat Das Gupta |
author_sort |
Asrafuzzaman . |
title |
An Empirical Investigation of Budget and Trade Deficits: The Case of Bangladesh |
title_short |
An Empirical Investigation of Budget and Trade Deficits: The Case of Bangladesh |
title_full |
An Empirical Investigation of Budget and Trade Deficits: The Case of Bangladesh |
title_fullStr |
An Empirical Investigation of Budget and Trade Deficits: The Case of Bangladesh |
title_full_unstemmed |
An Empirical Investigation of Budget and Trade Deficits: The Case of Bangladesh |
title_sort |
empirical investigation of budget and trade deficits: the case of bangladesh |
publisher |
EconJournals |
series |
International Journal of Economics and Financial Issues |
issn |
2146-4138 |
publishDate |
2013-09-01 |
description |
This study attempts to investigate the evidence of twin deficits hypothesis, that is, the simultaneous existence of fiscal and foreign trade account deficits in Bangladesh. In this regard this paper examines the causal relationship between budget deficit and trade deficit based on annual time series data from 1972-73 to 2011-12 fiscal year. Applying the VAR and Granger Causality after successfully running ADF and PP unit root test and cointegration rank test this paper reveals that budget deficit Granger cause trade deficit and vice versa but the relationship does not stand for the long-run dynamics. In fact, the long run relationship depends on overall macroeconomic environment and performances of other relevant variables. Policy implication is that Government should reduce budget deficit to improve the trade account balance. |
topic |
twin deficits bangladesh budget deficit trade deficit granger causality var |
url |
https://dergipark.org.tr/tr/pub/ijefi/issue/31958/351936?publisher=http-www-cag-edu-tr-ilhan-ozturk |
work_keys_str_mv |
AT asrafuzzaman anempiricalinvestigationofbudgetandtradedeficitsthecaseofbangladesh AT amitroy anempiricalinvestigationofbudgetandtradedeficitsthecaseofbangladesh AT sanatdasgupta anempiricalinvestigationofbudgetandtradedeficitsthecaseofbangladesh AT asrafuzzaman empiricalinvestigationofbudgetandtradedeficitsthecaseofbangladesh AT amitroy empiricalinvestigationofbudgetandtradedeficitsthecaseofbangladesh AT sanatdasgupta empiricalinvestigationofbudgetandtradedeficitsthecaseofbangladesh |
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