On the twin deficits hypothesis: is Malaysia different?
This paper discusses the on-going debates surrounding the issue of twin deficits in Malaysia. The statistical technique advocated by Toda and Yamamoto (1995) for handling economic variables that might spuriously move together is utilized to examine the long run causal relationships between budget an...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Universiti Putra Malaysia Press
2004
|
| Online Access: | http://psasir.upm.edu.my/id/eprint/3459/1/On_the_Twin_Deficits_Hypothesis_Is_Malaysia_Different.pdf |
| _version_ | 1825943492592926720 |
|---|---|
| author | Lau, Evan Baharumshah, Ahmad Zubaidi |
| author_facet | Lau, Evan Baharumshah, Ahmad Zubaidi |
| author_sort | Lau, Evan |
| collection | UPM |
| description | This paper discusses the on-going debates surrounding the issue of twin deficits in Malaysia. The statistical technique advocated by Toda and Yamamoto (1995) for handling economic variables that might spuriously move together is utilized to examine the long run causal relationships between budget and current account deficits. We examine more than the three decades of time series data to answer the question of whether the budget deficit had led to current account deficit. The empirical result reveals the presence of bi-directional causality between the two deficits in Malaysia. It is this finding that makes Malaysia different from the major industrialized countries. On the one hand, we find that the causal relationship is from budget to current account deficits providing evidence of twin deficits phenomena. On the other hand, the reverse
causation as detected in this study tends to suggest some evidence of current account targeting. Therefore, policy to curb 'chronic' current account deficit cannot be achieved if the policy markers simply rely on curtailing budget deficit. |
| first_indexed | 2024-03-06T07:01:11Z |
| format | Article |
| id | upm.eprints-3459 |
| institution | Universiti Putra Malaysia |
| language | English |
| last_indexed | 2024-03-06T07:01:11Z |
| publishDate | 2004 |
| publisher | Universiti Putra Malaysia Press |
| record_format | dspace |
| spelling | upm.eprints-34592015-09-14T00:16:59Z http://psasir.upm.edu.my/id/eprint/3459/ On the twin deficits hypothesis: is Malaysia different? Lau, Evan Baharumshah, Ahmad Zubaidi This paper discusses the on-going debates surrounding the issue of twin deficits in Malaysia. The statistical technique advocated by Toda and Yamamoto (1995) for handling economic variables that might spuriously move together is utilized to examine the long run causal relationships between budget and current account deficits. We examine more than the three decades of time series data to answer the question of whether the budget deficit had led to current account deficit. The empirical result reveals the presence of bi-directional causality between the two deficits in Malaysia. It is this finding that makes Malaysia different from the major industrialized countries. On the one hand, we find that the causal relationship is from budget to current account deficits providing evidence of twin deficits phenomena. On the other hand, the reverse causation as detected in this study tends to suggest some evidence of current account targeting. Therefore, policy to curb 'chronic' current account deficit cannot be achieved if the policy markers simply rely on curtailing budget deficit. Universiti Putra Malaysia Press 2004-09 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/3459/1/On_the_Twin_Deficits_Hypothesis_Is_Malaysia_Different.pdf Lau, Evan and Baharumshah, Ahmad Zubaidi (2004) On the twin deficits hypothesis: is Malaysia different? Pertanika Journal of Social Sciences & Humanities, 12 (2). pp. 87-100. ISSN 0128-7702; ESSN: 2231-8534 http://www.pertanika.upm.edu.my/view_archives.php?journal=JSSH-12-2-9 |
| spellingShingle | Lau, Evan Baharumshah, Ahmad Zubaidi On the twin deficits hypothesis: is Malaysia different? |
| title | On the twin deficits hypothesis: is Malaysia different? |
| title_full | On the twin deficits hypothesis: is Malaysia different? |
| title_fullStr | On the twin deficits hypothesis: is Malaysia different? |
| title_full_unstemmed | On the twin deficits hypothesis: is Malaysia different? |
| title_short | On the twin deficits hypothesis: is Malaysia different? |
| title_sort | on the twin deficits hypothesis is malaysia different |
| url | http://psasir.upm.edu.my/id/eprint/3459/1/On_the_Twin_Deficits_Hypothesis_Is_Malaysia_Different.pdf |
| work_keys_str_mv | AT lauevan onthetwindeficitshypothesisismalaysiadifferent AT baharumshahahmadzubaidi onthetwindeficitshypothesisismalaysiadifferent |