Mutual Relations of Macroeconomic Balances – Conclusions From International Comparisons (Wzajemne relacje bilansów makroekonomicznych – wnioski z porownan miedzynarodowych)
Jerzy Zyzynski ()
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Jerzy Zyzynski: Faculty of Management, University of Warsaw
Research Reports, 2018, vol. 2, issue 29, 73-108
We are still witnessing many misconceptions stemming from misunderstanding of macroeconomic conditions upon which macroeconomic stability relies. The economy is a complex mechanism consisting of great many communicating vessels between which the income and expenditure of a variety of entities are flowing. According to the most synthetic macroeconomic approach, in the case of an open economy, such flows make an arrangement of three macroeconomic balances which are interrelated by the following equation, discussed hundreds of times in macroeconomic literature: (G – T) = (S – I) + (Z – X). The very essence of the conditions of the macroeconomic stability is an interdependence between these balances, which are achieved as the economy operates. The author discusses the effects of promoting the myth of the budget balance, the understanding of the budget deficit and public debt, the importance of the interpretation of savings and investment, the importance of the balance as a distribution and resources, the relationship between the size of M2 money and the relationship between market rate and price resulting from purchasing power parities. He has undertaken a statistical analysis of the relationships between three macroeconomic balances on the basis of data for 35 countries in the years 2000–2015. The conclusions confirm the illusory nature of certain media-grounded views.
Keywords: macroeconomic stability; national savings; national investments; current accounts; OECD countries (search for similar items in EconPapers)
JEL-codes: A10 E10 E19 E60 (search for similar items in EconPapers)
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