Articlebronze2002

Multivariate-based causality tests of twin deficits in the US

54 citations0/0 files storedJournal of Applied Statistics

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Monetary Policy and Economic Impact Global Financial Crisis and Policies Economic Theory and Policy

Abstract

This paper provides an alternative methodology for testing the causality direction between twin deficits in the US. Rao's multivariate F-test combined with the bootstrap simulation technique has appealing properties, especially when the data-generating process is characterized by unit roots. In addition the results show that the effect of structural breaks are of paramount importance when the causality tests are conducted. In much contemporary applied econometrics there is all-too-little attention given to the possibility of changes in the economic process.

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References

1969Investigating Causal Relations by Econometric Models and Cross-spectral Methods 1992Testing the null hypothesis of stationarity against the alternative of a unit root 1989The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis 1980Domestic Saving and International Capital Flows 2010Critical Values for Cointegration Tests 1991Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?1996Making wald tests work for cointegrated VAR systems 1979Domestic Savings and International Capital Flows

Cited by

2003The Feldstein–Horioka Puzzle and Twin Deficits in Selected Countries 2013The dynamic linkages of fiscal and current account deficits: New evidence from five highly indebted European countries accounting for regime shifts and asymmetries 2016Determinants of Current Account Developments in the Central and East European EU Member States - Consequences for the Enlargement of the Euro Area 2006Structural breaks and the twin deficits hypothesis 2006An Empirical Investigation of Budget and Trade Deficits: The Case of Nigeria

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