Empirical Verification of the Twin Deficits Hypothesis in Morocco for the Period (1980–2023)

Abstract

During these last years, Morocco has almost always known at the same time a budget deficit and a current account deficit. So we can conclude prematurely the existence of a structural problem of twin deficits over a long period.

The article introduces in addition to the two balances, the variable transfers of MREs - second source of foreign currency after the tourist returns - as a participatory variable to the equilibrium of the current transactions and verify the hypothesis of the twin deficits using econometric tools, notably the method of Co-integration - to test the long-term relationship - and the method of Granger causality - to know the direction of causality -.

The results confirm the twin deficits hypothesis for Morocco for the period from 1980 to 20123 and show bidirectional causality between the variables and the lack of a balanced strategy.

Keywords : Twin deficit, Transfers of MREs, Co-integration, Granger causality, Balanced strategy.

JEL Classification : F13, F14, F15, F53

Paper type : Empirical research