Testing the Validity of the Triple Deficit Hypothesis in the Presence of Trade Liberalization: Evidence from Sri Lanka

Sri Lanka is a classic twin deficits economy characterised by fiscal dominance - high and public debt. This has manifested in degree of macroeconomic volatility, evidenced its frequent balance-of-payments crises instability. study assesses the validity triple deficit hypothesis presence trade liberalisation investigating causal association between deficit, current account financial with four-variate ARDL framework Granger causality test for period 1970-2020. The empirical findings imply that widened liberalisation. output bound cointegrating suggests there long-run relationship selected variables, whilst demonstrates bidirectional associations exist one-way relationships run from to deficit.