The nature of the twin deficit in light of the oil economy, the case of Iraq: an analytical and econometric study

Abstract

This research seeks to test the nature and validity of the theory of twin deficits in the Iraqi economy according to the theories that explain it, and the use of the autoregressive model (VAR) and the test of causality. The analytical and measurement results showed that the twin deficit theory is realized in the Iraqi economy, but it cannot be explained according to the Keynesian and Ricardian theory, due to the reality of our economy, where most of the variables of our economy depend on changes in oil prices. The coincidence of the two deficits depends on oil prices because the trade balance is almost completely dependent on oil exports. The same applies to the general budget, which depends mainly on oil revenues.