Empirical analysis of the twin deficits hypothesis in the republic of North Macedonia

Authors

  • Merale Vehapi
  • Fatbardha Jonuzi
  • Florenta Jonuzi

DOI:

https://doi.org/10.59380/crj.vi5.5105

Abstract

The twin deficits hypothesis is widely considered one of the most frequently employed phenomena in the economic literature. An econometric analysis of the twin deficit hypothesis is of special importance in understanding the perspective on macroeconomic stability in the Republic of North Macedonia. This paper aims to empirically test the validity of this hypothesis in the Republic of North Macedonia. To do so, we utilized quarterly data on Macedonia’s budget deficit, the current account deficit, exchange rate, interest rate, GDP, government expenditure, and money supply, starting from the first quarter of 2001 to the fourth quarter of 2022. Through the application of the ARDL model, the study found that between the variables taken into analysis, there exists a short and long-run relationship. More specifically exchange rate, government expenditure, and GDP result in improvement on the budget deficit, both in the short run and long run. While current account deficit, interest rate, and money supply result in worsening the budget deficit, both in the short run and long run.

Keywords:

North Macedonia, twin deficits, budget deficit, current account deficit, ARDL model

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Author Biographies

Merale Vehapi

Department of Finance and Accounting, Faculty of Economy, University of Tetovo, North Macedonia

Fatbardha Jonuzi

Kicevo Municipality, North Macedonia

Florenta Jonuzi

Master student in the Department of Finance, Banking and Insurance, Faculty of Economy, University
of Tetovo, North Macedonia

References

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Published

2024-07-31

How to Cite

Vehapi, M., Jonuzi, F., & Jonuzi, F. (2024). Empirical analysis of the twin deficits hypothesis in the republic of North Macedonia. CRJ, (1), 5–9. https://doi.org/10.59380/crj.vi5.5105

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Section

Articles