The Twin Deficit Hypothesis (TDH) is an economic proposition suggesting that there exists a positive causal association between Budget deficit and Current account deficit. This assertion has been the subject of debate in the scholarly and policy front. However, most of the already existing literature on the TDH has focused on already developed economies. Majority of this literature carried out bivariate analysis using annual data. This study investigates the TDH nexus for Kenya using quarterly data spanning from 1970Q1 - 2012Q1 in a multivariate approach. The study employed various econometric tests including Johansen & Juselius cointergration tests, Vector Auto Regression and Toda- Yamamoto’s Granger causality test. The study also estimated the Impulse response functions and Variance decomposition. The results indicate that the TDH does exist in Kenya in a multivariate environment as opposed to directly between budget deficits and current account deficits. The study proposes that the government should formulate adequate fiscal and monetary policies that will effectively manage the country expenditure and revenue. The government should also look into ways of increasing its revenues and reducing expenditures.
| Published in | International Journal of Business and Economics Research (Volume 3, Issue 5) |
| DOI | 10.11648/j.ijber.20140305.11 |
| Page(s) | 160-169 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
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Copyright © The Author(s), 2014. Published by Science Publishing Group |
Twin Deficit Hypothesis, Budget Deficit, Current Account Deficit
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APA Style
Erastus Kaiba Njoroge, George Kosimbei, Julius Korir. (2014). Testing the Twin Deficit Hypothesis for Kenya 1970-2012. International Journal of Business and Economics Research, 3(5), 160-169. https://doi.org/10.11648/j.ijber.20140305.11
ACS Style
Erastus Kaiba Njoroge; George Kosimbei; Julius Korir. Testing the Twin Deficit Hypothesis for Kenya 1970-2012. Int. J. Bus. Econ. Res. 2014, 3(5), 160-169. doi: 10.11648/j.ijber.20140305.11
AMA Style
Erastus Kaiba Njoroge, George Kosimbei, Julius Korir. Testing the Twin Deficit Hypothesis for Kenya 1970-2012. Int J Bus Econ Res. 2014;3(5):160-169. doi: 10.11648/j.ijber.20140305.11
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Download@article{10.11648/j.ijber.20140305.11,
author = {Erastus Kaiba Njoroge and George Kosimbei and Julius Korir},
title = {Testing the Twin Deficit Hypothesis for Kenya 1970-2012},
journal = {International Journal of Business and Economics Research},
volume = {3},
number = {5},
pages = {160-169},
doi = {10.11648/j.ijber.20140305.11},
url = {https://doi.org/10.11648/j.ijber.20140305.11},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20140305.11},
abstract = {The Twin Deficit Hypothesis (TDH) is an economic proposition suggesting that there exists a positive causal association between Budget deficit and Current account deficit. This assertion has been the subject of debate in the scholarly and policy front. However, most of the already existing literature on the TDH has focused on already developed economies. Majority of this literature carried out bivariate analysis using annual data. This study investigates the TDH nexus for Kenya using quarterly data spanning from 1970Q1 - 2012Q1 in a multivariate approach. The study employed various econometric tests including Johansen & Juselius cointergration tests, Vector Auto Regression and Toda- Yamamoto’s Granger causality test. The study also estimated the Impulse response functions and Variance decomposition. The results indicate that the TDH does exist in Kenya in a multivariate environment as opposed to directly between budget deficits and current account deficits. The study proposes that the government should formulate adequate fiscal and monetary policies that will effectively manage the country expenditure and revenue. The government should also look into ways of increasing its revenues and reducing expenditures.},
year = {2014}
}
TY - JOUR T1 - Testing the Twin Deficit Hypothesis for Kenya 1970-2012 AU - Erastus Kaiba Njoroge AU - George Kosimbei AU - Julius Korir Y1 - 2014/10/30 PY - 2014 N1 - https://doi.org/10.11648/j.ijber.20140305.11 DO - 10.11648/j.ijber.20140305.11 T2 - International Journal of Business and Economics Research JF - International Journal of Business and Economics Research JO - International Journal of Business and Economics Research SP - 160 EP - 169 PB - Science Publishing Group SN - 2328-756X UR - https://doi.org/10.11648/j.ijber.20140305.11 AB - The Twin Deficit Hypothesis (TDH) is an economic proposition suggesting that there exists a positive causal association between Budget deficit and Current account deficit. This assertion has been the subject of debate in the scholarly and policy front. However, most of the already existing literature on the TDH has focused on already developed economies. Majority of this literature carried out bivariate analysis using annual data. This study investigates the TDH nexus for Kenya using quarterly data spanning from 1970Q1 - 2012Q1 in a multivariate approach. The study employed various econometric tests including Johansen & Juselius cointergration tests, Vector Auto Regression and Toda- Yamamoto’s Granger causality test. The study also estimated the Impulse response functions and Variance decomposition. The results indicate that the TDH does exist in Kenya in a multivariate environment as opposed to directly between budget deficits and current account deficits. The study proposes that the government should formulate adequate fiscal and monetary policies that will effectively manage the country expenditure and revenue. The government should also look into ways of increasing its revenues and reducing expenditures. VL - 3 IS - 5 ER -
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