TY - JOUR ID - 20043 TI - The Effect of Budget Deficit on Current Account Deficit and Economic Growth JO - Journal of Economic Research (Tahghighat- E- Eghtesadi) JA - JTE LA - en SN - 0039-8969 AU - Farahbakhsh, Neda AU - farzinvash, asad AD - Y1 - 2010 PY - 2010 VL - 44 IS - 3 SP - EP - KW - Keynesian Proposition KW - panel data KW - Ricardian Equivalence KW - Twin Deficits Hypothesis DO - N2 - The twin deficits (budget deficit and current account deficit) have been argued in the economic literature since 1980s. This is a period in which the studies about budget deficit and the current account deficit were significantly increased in the United States. In the economic literature, there are two hypothesis: Keynesian hypothesis and Ricardian equivalence. The Keynesian proposition confirms the existence of a positive relationship between the two deficits, whereas the Ricardian equivalence argues that the budget and current account deficits are not correlated. This study analyses the twin deficit for 70 countries during 1985-2006 using the panel data. The reviewed countries, based on their incomes are classified into three groups: high incomes, middle incomes and low income countries. Effect of the budget deficit on the private consumption, current account deficit and eventually the effect of budget deficit on the economic growth have been studied. The results show that there is not a significant relationship between the two deficits and private consumption and economic growth in high income countries. But the results from the middle and low income countries confirm the significant relationship. JEL classification: F12 UR - https://jte.ut.ac.ir/article_20043.html L1 - https://jte.ut.ac.ir/article_20043_24a91dd4afd13f9ea5a87464c4a2e068.pdf ER -