<p>This study explores the twin deficit hypothesis for the ASEAN + 3 countries, using a database that consists of annual data and exceeds 30 years. This study, which is the first one that examines the relationship between the budget balance and the current account balance for the specific group of countries, implements panel unit root and cointegration techniques, as well as Granger-causality tests. Unlike most of the relevant studies, there is clear-cut evidence in favour of the twin deficit hypothesis. However, when the primary budget balance is used instead of the overall budget balance, the ‘feedback linkage’ seems to hold. This is a quite important result as it points out the perils from an imprudent expansionary fiscal policy. Moreover, public debt and output growth are negatively related to the current account balance, while excess savings are related to a current account surplus. Finally, the empirical findings suggest a negative relationship between trade openness and current account balance, which is an expected result for emerging economies, as most of the sample countries. In general, the empirical evidence and the discussion that follows suggest that expansionary fiscal policies should be implemented with prudence, because they may lead to current account imbalances and, thus, jeopardise economic growth.</p>