Twin Deficit in Nigeria: A Re-Examination

Twin Deficit in Nigeria: A Re-Examination

Amaghionyeodiwe, Lloyd Ahamefule
Opeyemi, Akinyemi

Abstract: This study re-examines the long run relationship between the budget and current account deficits in an oil-dependent open economy like Nigeria using a multivariate Granger causality test within the VECM framework. This result confirmed the existence of a long run relationship between the budget and current account deficit in Nigeria, thus supporting the Mudell-Fleming theory and refuting the Ricardian Equivalence Hypothesis (REH). The causality result indicates no causality between budget deficit and current account while the current account deficit causes budget account deficit. This implies that reduction in the current account deficits will help reduce the “twin deficit” dilemma.

Article
PeerReviewed

International Burch University

2015

2931