Ricardian equivalence, twin deficits, and the Feldstein-Horioka puzzle in Egypt

Journal of Policy Modeling, 2008, vol. 30, issue 6, 1041-1056

Abstract: Egypt has presented important budget imbalances. This paper tries to evaluate whether Egypt's public deficit has had any impact on current account imbalances, examining the validity of the twin-deficit hypothesis for Egypt. We conclude for the presence of a (weak) long-run relationship between the budget deficit and the current account deficit. Yet, we reject the twin-deficit hypothesis: we found evidence in favour of a reverse Granger-causality running from the external deficit to the budget deficit. Further, we conclude against the validity of full Ricardian equivalence in Egypt and present evidence in favour of a high degree of capital mobility.

Keywords: Twin; deficits; Current; account; deficit; Feldstein-Horioka; puzzle; Egypt; Fiscal; policy (search for similar items in EconPapers)
Date: 2008
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Working Paper: Ricardian Equivalence, Twin Deficits, and the Feldstein-Horioka puzzle in Egypt (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:30:y:2008:i:6:p:1041-1056

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