Validity of Twin Deficit and Triplet Deficit Hypothesis in the Relation of Current Account Deficit - Budget Deficit and Interest Rate: 1990-2019 Case of Turkey

Abstract

In this study, 1990-2019 period for Turkey, 'twin deficits' and 'triplet deficit' validity was analysed with Bayer-Hanck (2012) cointegration test and Hacker-Hatemi-J causality test. According to the findings of the causality analysis of Hacker and Hatemi-J (2006), it is concluded that there is a one-way causality relationship from budget deficit to current account deficit, from budget deficit to interest rate, from interest rate to current account deficit, and from interest rate to net savings rate. In the period analysed for Turkey, 'Twin Deficits that the hypothesis is valid but that the triplet deficit hypothesis is not valid.