Open AccessTwo Deficits and Economic Growth: Case of CEE Countries in Transition
Author(s) -
Henryk Gurgul,
Łukasz Lach
Publication year - 2012
Publication title -
ekonomia menedżerska/managerial economics
Language(s) - English
Resource type - Journals
eISSN - 2353-3609
pISSN - 1898-1143
DOI - 10.7494/manage.2012.12.1.79
Subject(s) - interdependence , economics , causality (physics) , convergence (economics) , granger causality , transition (genetics) , empirical evidence , transition countries , deficit spending , budget constraint , macroeconomics , monetary economics , international economics , econometrics , microeconomics , political science , debt , biochemistry , chemistry , physics , philosophy , epistemology , quantum mechanics , gene , law
The main goal of this contribution was to provide evidence on the dynamic interdependencies between economic growth and budget and trade deficits in ten new EU members in transition in the last decade. It is worth to note that beside establishing directions of causal relationships this paper also derived some suggestions on signs of the dynamic dependencies analyzed.
The outcomes of this paper confirmed that the budget deficits were significantly slowing down the GDP growth rates in case of new EU-members in transition. In addition, these deficits had negative impact on the convergence process of examined countries towards the highly developed European economies. The evidence supporting adverse causality was considerably weaker.The empirical results allow to claim that in the period under study there was a unidirectional negative Granger causality from budget deficits to trade deficits. Therefore, in case of CEE economies in transition the twin deficit hypothesis was not the case.