Akademik Veri Yönetim Sistemi
International Research Journal of Finance and Economics, cilt.74, ss.30-45, 2011 (Scopus)
The purpose of this study is to investigate the twin deficit problem for the Turkish economy using bounds testing approach known as ARDL (autoregressive distributed lag) to cointegration method and Toda and Yamamoto (1995) Granger causality test. The study covers the annual data from 1974 to 2010. The cointegration test results suggest that the variables are moving together in the long run. The positive value on the budget deficit coefficient implies that Turkey has a twin deficit problem. The presence of twin deficit has also been supported by the Toda-Yamamota causality test results. As expected, the negative and less than 1 investment coefficient indicates Feldstein-Horioka hypothesis holds. Further, it indicates that Turkey could not well-integrated into the international capital markets with the model revealing that one fifth of the investments are financed through foreign savings. © Euro Journals Publishing, Inc. 2011.