Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/318738 
Authors: 
Year of Publication: 
2020
Citation: 
[Journal:] Business Systems Research (BSR) [ISSN:] 1847-9375 [Volume:] 11 [Issue:] 3 [Year:] 2020 [Pages:] 45-62
Publisher: 
Sciendo, Warsaw
Abstract: 
Background An econometric analysis of the twin deficit hypothesis is of special importance for the Republic of North Macedonia in view of its perspective membership in the European Union and from the point of view of its macroeconomic stability in the long run. Objectives The objective of this paper is to test empirically the validity of the twin deficit hypothesis in the Republic of North Macedonia. Methods/Approach To achieve this objective, we used actual quarterly data on Macedonia's budget and the current account deficit in the period from the first quarter of 2005 until the fourth quarter of 2017 and applied several econometrics methods: the Granger causality, a vector autoregressive (VAR) and a vector error correction model (VECM). Results These findings point to the conclusion that efforts focused on improving the current account imbalances through fiscal policy will be inefficient in the short run. Conclusions However, the existence of a long run relationship between the budget deficit and the current account deficit indicates the necessity of policy initiatives focused not only on reducing the budget deficit, but also on improving the external position of the country though export promotion.
Subjects: 
Twin deficit
Granger causality
VAR
VECM
JEL: 
C22
E62
F32
F41
H62
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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