Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/66616
Authors: 
Farajova, Kahnim
Year of Publication: 
2011
Citation: 
[Journal:] International Journal of Economic Sciences and Applied Research [ISSN:] 1791-3373 [Volume:] 4 [Year:] 2011 [Issue:] 2 [Pages:] 143-158
Abstract: 
In recent years, the emergence of rising budget deficit is the main reason forcing economists to investigate the reasons for changes in fiscal balances. The purpose of the paper is to investigate the relationship between budget deficit and macroeconomic fundamentals using data from Azerbaijan. The empirical analysis applies ARDL Cointegration methodology in conjunction with Granger causality tests to provide evidence for both the long and short run dynamics between the variables involved in the analysis. Using the Error Correction specification, there was found evidence of long-run causality running from current account, real interest rate, GDP, inflation and exchange rate to budget deficit. There was also found evidence of short-run Granger causal effects running from current account and real interest rate towards budget deficit and a rather weak causal effect from inflation to budget deficit. However, there is no short run causality running from interest rate to budget deficit.
Subjects: 
budget deficit
fiscal policy
cointegration methodology
error correction model
JEL: 
E62
H62
C22
Document Type: 
Article

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