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The Effects of Twin and Triplet Deficits on Sustainable Growth in A Fragility Perspective

Summary/Abstract: In research, the effects of current account (CA) deficits on economic growth in the sample of the Fragile Five (F5) countries, under the assumption of the twin and triplet deficit hypothesis, are investigated by panel regression (LS) analysis in the sample of 1989-2022. According to the average of the last 12 years, Brazil, South Africa, Indonesia and India have twin deficits while Turkiye has a triple deficit. Turkiye has the highest volatility in the growth rates of the F5 countries and the volatility of all is quite high generally. According to the LS results applied to the series all of which are stationary in the analysis, when the CA balance/GDP decreases by 1 point (CA deficit increases) in F5 countries, economic growth increases by approximately 0.19 points in the same period. The efforts of all fragile economies to sustain economic growth have a negative impact on the CA balance. In Turkiye, the relationship between growth and CA deficit is stronger due to the triple deficit. In models excluding Turkiye, the coefficient decreases in absolute terms. Both the triple deficit index values and high volatility and the regression results suggest that Turkiye is the most vulnerable economy among the F5 countries.

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