| dc.description.abstract | The theoretical framework of National Income Identity in economic theory shows that there
exist a relationship between the budget and the current account deficit. In this paper, we
provide an exhaustive characterization of the empirical long run equilibrium linkage and
causality between the current account deficit and budget deficit using Vector Autoregressive
Model (VAR) with extension of Vector Error Correction Model and by adopting Johansen
Maximum Likelihood Estimation Cointegration methodology, which also involved unit root
test and the use of Granger test to investigate the causality between the two deficits. The
results indicate that both the current account and budget deficits are integrated of order one
and there exists along run relationship between them, on the other hand causality runs from
current account deficit to Budget deficit. The econometric analysis suggests that … | en_US |
