Abstract:

Triple deficit hypothesis implies coexistence of budget deficit, savings-investment deficit and current account deficits. They have a great importance in terms of their impact on macroeconomic stability in Turkey as they have in other developing countries. Therefore, the purpose of the present study is to investigate whether triple deficits hypothesis is valid for Turkey over the period of 1960-2016 using the Johansen cointegration test and the Granger causality test based on error correction model. It is concluded from the obtained results of the cointegration test that there is a long-run relationship among the variables. The results of the causality test also show that there is causality relationship from the budget deficit and the savings-investment deficit to the current account deficit in the long run. Overall, these results indicate that the hypothesis of triplets deficits is valid for Turkey over the long run.

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