Does Triple Deficits have (Un) Stable Causality for the EU Members? Evidence from Bootstrap-corrected Causality Tests

The determination of current account deficit based on budget deficit has been the focus of attention in EU countries recently. In a theoretical explanation, the Ricardian Equivalence and the Keynesian Hypothesis do not agree on this argument, and thus, researchers have sought to choose between these hypotheses. Besides, Feldstein-Horioka puzzle may emerge in trying to define twin deficits. In order to measure the direction of causality among net savings, budget and current account deficits, Hacker and Hatemi-j (2006) bootstrap causality test is applied for 2002:Q1-2013:Q3, and empirical results provide evidence on the twin and triple deficits for different EU countries.