Cointegration Analysis of Twin Deficit: An Indicator Saturation Approach
Author: Aqib

This research aims to examine the econometric methodology of the triple deficit’s hypothesis in the existence of multiple structural breaks. Triple deficit theory is a put forward by expanding the twin deficit theory, to recognize the private deficit together with the trade deficit and budget deficit and to investigate the relationship among these under the Keynesian approach. Annual time series data has been used from the period 1975 to 2018. Previous literature is evident with the fact that researchers have employed traditional econometric techniques and did not incorporate multiple structural breaks. To fill the existing gap in previous literature, this study has applied econometric techniques that captured the impact of multiple structural breaks in the series. In this study we used the saturation approach (impulse indicator saturation and step indicator saturation) for multiple structural breaks and equilibrium correction model (Eqcm) for cointegration analysis. Results concluded that in the static equilibrium correction model there has been a positive relationship between fiscal-deficit, private deficit and trade-deficit in the existence of multiple breakpoints (I: 1977, I: 1998, I: 2018, S1: 1987, S1: 2001, S1: 2004 and S1: 2008). In the dynamic equilibrium correction model, there exists a positive relationship both in (short-term and long-term) between budget-deficit, private deficit, and trade deficit in the presence of three-step indicators (S1: 2001, S1: 2004 and S1: 2008). Supervisor:- Dr Amena Urooj Co-supervisor:- Uzma Zia

Meta Data

Supervisor: Amena Urooj
Cosupervisor: Uzma Zia

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