Helmy H.E.Department of EconomicsFaculty of Management SciencesOctober University for Modern Sciences and Arts (MSA)6th of October CityEgypt2020-01-092020-01-0920181618938https://doi.org/10.1016/j.jpolmod.2018.01.009PubMed ID :https://t.ly/RKYxqScopusWe employ a new approach to the twin deficit hypothesis aimed at enhancing policy making in Egypt. In contrast to the conventional twin deficit hypothesis between the current account, which comprises many items out of governments� scope of maneuvering, and the budget deficit, we track the causal link between Egypt's merchandise trade deficit and the budget deficit. We begin first by examining the conventional twin deficit hypothesis using a VAR model, which implies short run reverse causation running from the current account deficit to the budget deficit. Second, as cointegration exists between the budget deficit and the merchandise trade deficit, we run a multivariate VECM model which refutes the twin deficit hypothesis in favor of the current account targeting hypothesis. In policy terms, ameliorating Egypt's trade balance would ultimately improve its fiscal balance as well. � 2018 The Society for Policy ModelingEnglishOctober University for Modern Sciences and ArtsUniversity for Modern Sciences and ArtsMSA Universityجامعة أكتوبر للعلوم الحديثة والآدابCointegrationEgyptTwin deficitsVector Autoregression (VAR)Vector Error Correction (VECM)Articlehttps://doi.org/10.1016/j.jpolmod.2018.01.009PubMed ID :