Prevalence of twin deficits in selected European Union countries and in Poland in the years 2009–2018

Abstract

The aim of the article is to determine the degree, direction and strength of impact of the studied variables, i.e. the state budget balance and the current account balance as part of Poland’s balance of payments in the years 2009-2018 against the background of selected European Union (EU) countries. The main research questions focus on determining the type of relationships connecting the studied deficits in the light of previous studies dedicated to the twin deficits hypothesis. The methodology used is based on integrated correlation analysis, linear regression and an analysis of the coefficient of variation. As a result of the study, a strong correlation was found between the cumulative values of the studied deficits, which confirms the existence of the twin deficits hypothesis in Poland in the examined period and means that the budget deficit affects the current account balance. A change in the cumulative balance of the budget by 1% leads to a change in the cumulative balance of the current account of the balance of payments by 0.89%. It can be presumed that the problem of budget deficits and the related debt crisis as well as balance of payments balances under the dichotomy of “surplus north” and “deficit south” in the next decade will be one of the most conflicting and disintegrative for the EU. Thus, the search for a path to budget (internal) balance and balance of payments (external) is one of the key challenges for maintaining cohesion and maintaining sustainable development both in Poland and the entire EU

Keywords

• European Union
• EU
• Poland
• twin deficits
• budget deficit
• balance of payments