Twin Deficit Revisited: Evidence From India, Pakistan And Mexico

Abstract

In recent years twin deficit has been a subject of investigation for several authors including Darrat (1988), Day (1998), Evans (1986).  In the decade of 1980s when US deficits behaved much like twins rather than distant cousins, there was a great interest in further research.  Several attempts have been made to explain the reasons of expected casuality between trade and budget deficits.  This paper attempts to test this casuality for trade and budget deficits for the annual data of India, Pakistan and Mexico.