ARE TWIN DEFICITS REALLY TWINS?

Abstract

The currents study objects to ascertain the twin deficit hypothesis in case of Pakistan from the period of 1989-2020 covering 32 years. Annual secondary data has been employed for the analysis. To evaluate the current twin deficit phenomenon two equations has been used. To check the long run co=integration Engel Granger Causality test has been employed. To check the stationarity of the variable Augmented Dickey Fuller test is used, and stationarity has been checked for each variable. The study result confirms the Recardian View of no causality found between the two deficits, hence changing the fiscal deficit will not cause any change in the trade deficit. Future researchers are encouraged to use a multivariate model and work on the coming period to confirm the results of the current study.