Twin deficits hypothesis and capital mobility

The ASEAN-5 perspective

Ahmad Zubaidi Baharumshah, Hamizun Ismail, Evan Lau

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

This paper investigates the relevance of the twin deficits hypothesis (TDH) in five Association of Southeast Asian Nations (ASEAN) countries. We examine the causal relation between current account deficits, budget deficits and investments. The empirical findings may be summarised as follows. First, TDH holds only for three countries: Malaysia, Thailand and the Philippines. In other words, a budget deficit plays a significant role in the determination of a current account deficit in all the three countries. Second, the findings are in line with the widely held view that government expenditure crowds out private investment. Third, investment shows a noticeable impact on current account deficits. Finally, a high proportion of domestic investment is financed from international sources, which suggests that the Feldstein-Horioka puzzle is less important in these emerging economies.

Original languageEnglish
Pages (from-to)15-32
Number of pages18
JournalJurnal Pengurusan
Volume29
Publication statusPublished - Dec 2009

Fingerprint

Current account deficit
Asia
Capital mobility
Twin deficits
Budget deficits
Philippines
Emerging economies
Proportion
Feldstein-Horioka puzzle
Thailand
Domestic investment
Private investment
Crowd-out
Malaysia
Government expenditure

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Accounting
  • Business and International Management

Cite this

Twin deficits hypothesis and capital mobility : The ASEAN-5 perspective. / Baharumshah, Ahmad Zubaidi; Ismail, Hamizun; Lau, Evan.

In: Jurnal Pengurusan, Vol. 29, 12.2009, p. 15-32.

Research output: Contribution to journalArticle

Baharumshah, Ahmad Zubaidi ; Ismail, Hamizun ; Lau, Evan. / Twin deficits hypothesis and capital mobility : The ASEAN-5 perspective. In: Jurnal Pengurusan. 2009 ; Vol. 29. pp. 15-32.
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