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Revista Latinoamericana de Desarrollo Económico

On-line version ISSN 2074-4706

Abstract

LANTERI, Luis N.. Terms of Trade and Twin Deficits: Evidence for Argentina. rlde [online]. 2015, n.23, pp.9-26. ISSN 2074-4706.

This paper investigates the validity of the twin deficits hypothesis (fiscal and external), in the case of a small country like Argentina. Paper analyzes, through VEC models (error correction model), the long-run relationship between current account, budget deficit (or surplus), investment and terms of trade for the period 1993-2012. Results suggest that increases in the fiscal deficit and investment deteriorate current account balance. Moreover, fiscal balance anticipate (Granger causality) to the current account and investment, but not the reverse.

Keywords : twin deficits; terms of trade; VEC models; National Account base 1993; Argentina.

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