Yıl : 2020 Cilt : 7 Sayı : 1

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Twin Deficits Hypothesis as an Indication of Government Failure in Sierra Leone: An Empirical Investigation (1980-2018)

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This paper examines the assertion of twin deficit hypothesis as an indication of government (policy) failure in Sierra Leone through the utilisation of relevant variables from 1980 – 2018. The paper is considered very important, with its application to the economy of Sierra Leone, which seems to have battled with structural problems, particularly policy failures, as manifested through over-burdened current account and fiscal deficit, which is presently overshadowing efforts of changedregime to make headway with planned developmental goals. Theoretical and empirical literature was reviewed in relation to the twin deficit hypothesis. Empirical outcome using the Fully Modified Ordinary Least Squares (FMOLS) failed to reject the twin deficit hypothesis; an indication that fiscal deficit is partly responsible for the negative current account position in Sierra Leone. Evidence from the outcome is consistent with expectation for a small open economy [Sierra Leone], burdened with failed institutional governance policies in areas connected with unproductive real sector and high lending rates, considered as disincentive to private sector investments. To address the problem, policy recommendations have been proposed, pointing to a boost in real sector activities – this will help facilitate growth and mobilisation drive to improve domestic revenue collection, also channelled through the Treasury Single Account (TSA) for effective monitoring. Conscious efforts should be made to stepup operations that deter corruption, while firming up efforts to to boost exports through competitive business operations.

Anahtar Kelimeler

Twin-deficit-hypothesis   government-failure   current-account-balance   fiscal-deficit   policy-shocks  

Sorumlu Yazar

Emerson JACKSON

Kaynakça

  • Abell, J. (1990), Twin deficits during the 1980s: An empirical investigation, Journal of Macroeconomics, Vol. 12, 81–96.
  • Bangura, A., Tarawalie, A.B., Fofanah, L., & Macarthy, S. (2016). Macroeconomic determinants of budget deficit: Evidence from Sierra Leone. International Journal of Economic Perspectives, Vol. 10(1), 5–13
  • Barro, R. (1989). The Ricardian approach to budget deficits”, Journal of Economic Perspectives, 3(2), 37–52.
  • Cavallo, M. (2005). Understanding the twin deficits: New approaches, new results. Federal Reserve Bank of San Francisco Economic Letter, No. 16.
  • Chowdhary, K. and Saleh, A. S. (2007). Testing the Keynesian proposition of twin deficits in the presence of trade liberalization: Evidence from Sri Lanka. Economics Working Papers.
  • Chunda, S.M. (2018). Diaspora businesses in Africa: Survival and sustainability. In, Hack-Polay, D., and Siwale, J. (Eds.) African Diaspora Direct Investment. Palgrave Macmillan, Cham. d
Daha Fazla Göster

Detaylar

DOI 10.26650/JEPR658440

Submission : 30 Eki 2019

Early Viewed : 31 Oca 2020

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