Abstract
Twin deficit identity is used to refer to a nation’s current account deficits and a simultaneous fiscal deficit. The term became widely used in the 1980s until the 1990s.Chronic external deficit problems have been encountered since the adoption of the outward-oriented growth model for Turkish economy. This study aim the validity of twin deficits hypothesis (the relationship between the budget deficit and the current account deficit) by using the data period 1998:1-2012:3 in Turkey. The Public deficit indicators represented by budget deficit / GNP, reel exchange rate index and government domestic borrowing stock. In addition, current balance deficit is an another indicator for model. For this purpose, bound test approach developed by Pesaran et al.(2001) was applied by using data of determined period. According the result of econometric analysis, there is no long-run relationship between current balance deficit and budget deficit but there is a strong positive relationship between current balance deficit and budget deficit in the short-run.
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