Özet:

The state of having a budget deficit and a current account deficit in an economy is expressed as the twin deficit hypothesis. Budget deficit and current account deficit are seen as important problems for developed and developing countries. In the literature, there are empirical results of the Traditional Keynesian view, which states that the budget deficit will cause a current account deficit, and the Ricardian Equivalence Hypothesis, which states that there is no relationship between the current account deficit and the budget deficit. The aim of this study is to investigate the validity of the twin deficit hypothesis in the 1995-2020 period data in “Canada, France, Germany, Italy, Japan, Russia, England and the USA”, which are known as the eight most developed countries in the world, which are considered as industry giants. The second generation panel causality analysis developed by Emirmahmutoğlu and Köse (2011), which is based on the heterogeneity of the coefficients, was used in the analysis. The findings support the Ricardian view stating that there is no relationship between the budget deficit and the current account deficit. Therefore, it was concluded that the twin deficit hypothesis is not valid in G8 countries.

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