Using time series techniques, this study explores the relationship between trade deficits and budget deficits in Italy in the period 1970-2010. Empirical findings show that current account balance and government budget are I(1) processes. Cointegration tests reject the presence of a long-run relationship between these variables. Finally, Granger-causality tests show a unidirectional flow from trade deficits to budget deficits, in line with Neo-classical view.
The Twin Deficits phenomenon: evidence from Italy
MAGAZZINO, COSIMO
2012-01-01
Abstract
Using time series techniques, this study explores the relationship between trade deficits and budget deficits in Italy in the period 1970-2010. Empirical findings show that current account balance and government budget are I(1) processes. Cointegration tests reject the presence of a long-run relationship between these variables. Finally, Granger-causality tests show a unidirectional flow from trade deficits to budget deficits, in line with Neo-classical view.File in questo prodotto:
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