Trends in UK Current Account and Budget Deficit Assignment Sample

Trends in UK Current Account and Budget Deficit

Are you looking for Expert Assignment Writers in the UK? Native Assignment Help boasts a team of highly qualified writers who are ready to assist you with your academic needs. With our commitment to excellence, you can rest assured that your assignments are in good hands.

Introduction:Analyzing UK Economic Data on Current Account and Budget Deficits Over Time

Question 1

1. Introduction - Data Analysis & Commentary

The trend or association of the current account and budget deficit over time in the country the UK is shown in this study. The changes in the budgets and trends in the current account of the country are elaborated here. The main aim of this study is to ascertain the reasons for this changing pattern. In 2021, the growth rate of GDP increased by 6.76% from the previous year. The trends in the economy related to the current account show £6,757 at an average rate.

2. Review of Theories and Existing Literature

2.1 Association of the current account

The current account balance refers to a nation's balance or record of international transactions with the decline of the world. As opined by Ajnakina et al. (2020), it shows the country's budget to handle the economic situation in a flexible way. It includes those events and transactions whose values are considered in financial terms. The economic values between the residents and non-residents of the country are mainly measured in the current account. There are four types of current accounts, foreign, premium, standard and packaged current accounts. In the year 2022, the country UK has estimated its current account balance in deficit for the first quarter which is £25.2 billion. As mentioned by Bayramo?lu and Öztürk (2018), there are four components of a current account that are “goods, services, income, and current transfers”. The trends in the current account show the changes in the current year's balance from one year to another.

The changes in GDP current year were low at 7.3 billion or in percentage 1.2% of the GDP. As per the view of Bryson et al. (2021), this shows the narrowed GDP where the deficit balance is showing the national incomes at a low level. The trade balance and economic expansion response are the indicators through which the balances of the current account are being made for foreign exchanges.

2.2 Association of the budget deficit

In this context, the expenditure of a country that surpasses its revenue in the current financial period is stated as a budget deficit. As per the author Dantchev and Wolke (2019), usually, a budget deficit is measured by the expenditure caused by the business or individual of the country. The national debt can be ascertained through these methods. There are many types of budget deficits that are fiscal, current year, total and primary year deficits. The formula that is used to ascertain the deficit is “Fiscal expenditure - Total receipts (excluding borrowings)”. If the budget deficit increases the treasury bonds are issued by the respective nation. As stated by Etokakpan et al. (2020), in the year 2020, the “Congressional Budget Office” (CBO), has issued a notice and it stated that the budget deficit for the year was 1 trillion. This is the largest deficit seen in the last two decades. 

It is mainly reflected in the percentage of GDP. it can affect the country's economy by decreasing the economic prosperity of a nation. In the context of the UK, the government revenue reflects that the budget deficit was stated at £318 billion (Fonseka et al. 2018). This amount is equivalent to 14.8% of the country's GDP.

2.3 Development of the twin deficit hypothesis

In this the exchange rate and interest rate of the country shows an upward shift in the graphs. This is due to various reasons.

• Increase in interest rate
• Foreign investors
• Increase in budget
• A deficit in the GDP
• Government taxes

These are the causes behind the upward rising of the graph. As per the view of Gardner et al. (2020), this makes the economy in a bragged situation where the economy is at a stagnant position and they don't want to shift in their market levels. This is basically a concerning situation. The fiscal effects on the current account show the direct linkage between the current account and budget deficits. Both terms are collateral, if one decrease by a few percentages the other one will naturally decrease its position. The UK is the developed country; the current year balances might be different from previous years but cannot affect the country's economical position to a great extent (Gaysset et al. 2019). The increasing rate will not attract the exports as the exporters have to pay huge interest on their borrowings.

Therefore to attract the importers the trade balances have reduced their interest rates. The “major factor in the current deficit account variability” is shown through the budget deficits which lead to increasing the amount of the current balance. As stated by Handoyo et al. (2020), this is to show the trends of the current account with respect to the budget deficit. The reason for this development of the hypothesis is that if one's rates are low in comparison to others then the country needs to focus on in its imports more than exports.

2.4 Patterns of current account and budget deficit

In this context, the patterns of the current account and the budget deficit are can be stated that the “Twin deficit hypothesis” is true. It shows that the changes occurred due to this development of the twin approach (worldbank.org, 2022). The fiscal deficit is a budget short fall for the current period. For example- if the country has a 1 billion budget for the current year's expenditure, certainly it requires 1.5 billion for the budget. Then the deficit of 0.5 billion needs to be extracted from the foreign investment or borrowings (Jackson and Jabbi 2020). This states treasury bond needs to be adjusted the remaining 0.5 billion amount.

Importing is more than exporting shows the deficit balance in the current account. If this happens on a regular basis then the country can run into a loss. As per the view of Muñoz-Fernández et al. (2020), in the context of the UK, exports are more than imports. This shows the potential of the country in managing its GDP and business account alternatively. As it is a developed country but it has made the imports more in the year 2021 due to the increasing demand. It is not “detrimental to a nation's economy”, the external debt might be used to finance the further lucrative investments of the country (Ncanywa and Letsoalo 2019). The inflow of foreign capital on a regular basis makes the country more authentic to deal with the recession segments.

3. Methodology and Data

The trends and associations of the current year is been extracted through the research methodology. As opined by Rodríguez et al. (2022), in this the research approaches, significance and methods are described. The quantitative research methodology is been conducted to analyse the trends in the current account and budget deficit. These trends and their values are taken from the World Bank website of the country UK. The changes in the current account and budgets of the country in the last five years are contracted in this research. Empirical findings related to the patterns of the current account have been made by the following changes stated in the methodology. As per the view of Rosano et al. (2022), the methods or techniques of this data collection method is been discussed here. These results are obtained by using correlation and regression calculation through descriptive statistics.

Secondary quantitative data is been chosen to evaluate the findings of this discussion. It reflects the Positive and exact results from the research where the value of trends and changes in the current account of GDP is visible (Smeha et al. 2022). These data are the existing data which are already published through a few legal sources. For this research descriptive approach is been acquired by the researcher. This is because it shows all the quantitative and qualitative aspects of the data that are collected through published sources. Positivism research philosophy is used to overlook the research report (Xie et al. 2019). As it states all the data taken are showing positive values and “factual knowledge gained through observation (the senses), including measurement, is trustworthy” or not.

As stated by Todorov and Durov (2020), the descriptive and correlation research design is used here. In order to get accurate data, this design and methods are applicable for this research.

The Hypothesis that has been taken for the study is shown below.

HO1: the current account balance is depending upon UK trade, capital account and income levels.

H02: UK budget deficit depends on exports and imports levels.

4. Results

Current account balance of the UK for the last 5 years

Descriptive Statistics
N	Minimum	Maximum	Mean	Std. Deviation
UK Current account balance (BoP, current US$)	5	-146431979071.8810	-73658364680.1452	-101504756646.075160	29718949238.1596400
Valid N (listwise)	5

Table 1: Descriptive statistics

(Source: self-created)

From the above analysis it can be seen that the descriptive analysis value of the five-year current account balance implies a positive result. The five-year balances show the negative values that are -146431979071.88, -98075856295.83, -112483874564.84, -76873708617.68, and -73658364680.15 from year 2017-to 2021 (Zhan et al. 2022). These negative values simplest the five-year balances at 11.088.

ANOVAa
Model	Sum of Squares	df	Mean Square	F	Sig.
1	Regression	7.870	1	7.870	11.088	.045b
Residual	2.130	3	.710
Total	10.000	4
a. Dependent Variable: year
b. Predictors: (Constant), UK Current account balance (BoP, current US$)

Table 2: calculation of regression

(Source: self-created)

From the five-year values the regression value stands at 11.088. This shows that the researcher has accrued the value in such a case where the firm can implement various strategies regarding the current account balances of the country UK. 2.130 show the residual from where the country can get external incomes up to this limit.

Correlations
UK Current account balance (BoP, current US$)	year
UK Current account balance (BoP, current US$)	Pearson Correlation	1	.887*
Sig. (2-tailed)	.045
N	5	5
year	Pearson Correlation	.887*	1
Sig. (2-tailed)	.045
N	5	5
*. Correlation is significant at the 0.05 level (2-tailed).

Table 3: Calculation of correlation

(Source: self-created)

From the five-year current account balance the correlation value is ascertained at around .887 in the current year. It can be stated that the4 differences in each year's value simplest the correlations in a negative form. Where the variables of the year 2018 are taken as the initial output and the variable that has identified value is stood around 0.45.

The budget deficit of the UK for the last 5 years

Descriptive Statistics
N	Minimum	Maximum	Mean	Std. Deviation
V3	3	2.7	2017.0	691.767	1147.9905
V4	3	2.6	2018.0	691.900	1148.7362
Valid N (listwise)	3

The above table shows the descriptive statics of the budget deficit where the deficits are stated at 55.6, 55.1, 39.1, 59.4, and 327.6. These five-year values are obtained from the given site of the world bank of the country UK. The variables are stated at 1147.9905 and 1148.7362 in these descriptive statistics.

The above graph shows the regression value where a histogram is drawn on the based hypothesis. In this, the residual values in terms of percentages are stated at 2.7, 2.6, 1.8, 2.6, and 15.3. These percentages show the curved line where the interest rates are high at a few points and low in the initial and ending period.

Trend or association of the current account and budget deficit are shown by the correlations. From the above table, it can be stated that the values of correlations are showing adequate values where the deficit budgets are levied upon the variables that are mentioned above. The changes in the budget deficits show slight changes of 0.5 % in the last five years.

Conclusion

Based on the above context it can be ted that the current account and budget deficit are the twin hypothesis through which the economical position of a country is determined. The trends in both accounts show the alternative effects of the GDP where the GDP is declining to a few extents due to the market dynamics. The research methods and approaches are suitable for this kind of research as they show sufficient data and sources that can be legal and fair for the research purpose. The results from the findings in the form of correlation and regression show the accurate results of the current account balances. The five-year balances in both the current and budget account deficit can be evaluated using the respective sites' data.

References

Ajnakina, O., Stubbs, B., Francis, E., Gaughran, F., David, A.S., Murray, R.M. and Lally, J., 2020. Hospitalisation and length of hospital stay following first-episode psychosis: systematic review and meta-analysis of longitudinal studies. Psychological Medicine, 50(6), pp.991-1001.

Bayramo?lu, A.T. and Öztürk, Z., 2018. Assessing the twin and triple deficit hypotheses in developing economies: A panel causality analysis. In Global Approaches in Financial Economics, Banking, and Finance (pp. 209-225). Springer, Cham.

Bryson, H., Perlen, S., Price, A., Mensah, F., Gold, L., Dakin, P. and Goldfeld, S., 2021. Patterns of maternal depression, anxiety, and stress symptoms from pregnancy to 5 years postpartum in an Australian cohort experiencing adversity. Archives of women's mental health, 24(6), pp.987-997.

Dantchev, S. and Wolke, D., 2019. Sibling bullying at 12 years and high?risk behavior in early adulthood: A prospective cohort study. Aggressive behavior, 45(1), pp.18-32.

Etokakpan, M.U., Solarin, S.A., Yorucu, V., Bekun, F.V. and Sarkodie, S.A., 2020. Modeling natural gas consumption, capital formation, globalization, CO2 emissions and economic growth nexus in Malaysia: Fresh evidence from combined cointegration and causality analysis. Energy Strategy Reviews, 31, p.100526.

Fonseka, T.M., MacQueen, G.M. and Kennedy, S.H., 2018. Neuroimaging biomarkers as predictors of treatment outcome in Major Depressive Disorder. Journal of affective disorders, 233, pp.21-35.

Gardner, K.J., Bickley, H., Turnbull, P., Kapur, N., Taylor, P. and Clements, C., 2020. The significance of site of cut in self-harm in young people. Journal of affective disorders, 266, pp.603-609.

Gaysset, I., Lagoarde-Segot, T. and Neaime, S., 2019. Twin deficits and fiscal spillovers in the EMU's periphery. A Keynesian perspective. Economic Modelling, 76, pp.101-116.

Handoyo, R.D., Erlando, A. and Astutik, N.T., 2020. Analysis of twin deficits hypothesis in Indonesia and its impact on financial crisis. Heliyon, 6(1), p.e03248.

Jackson, E. and Jabbie, M., 2020. Twin Deficits Hypothesis as an Indication of Government Failure in Sierra Leone: An Empirical Investigation (1980-2018). Journal of Economic Policy Researches, 7(1), pp.43-68.

Muñoz-Fernández, N. and Sánchez-Jiménez, V., 2020. Cyber-aggression and psychological aggression in adolescent couples: A short-term longitudinal study on prevalence and common and differential predictors. Computers in Human Behavior, 104, p.106191.

Ncanywa, T. and Letsoalo, T.E., 2019. Which among twin deficits hypothesis, twin divergence, and Ricardian's equivalence hold in a developing country?. Journal of Public Affairs, 19(2), p.e1904.

Rodríguez, J.M., Bae, B., Geronimus, A.T. and Bound, J., 2022. The Political Realignment of Health: How Partisan Power Shaped Infant Health in the United States, 1915–2017. Journal of health politics, policy and law, 47(2), pp.201-224.

Rosano, C., Metti, A.L., Rosso, A.L., Studenski, S. and Bohnen, N.I., 2020. Influence of striatal dopamine, cerebral small vessel disease, and other risk factors on age-related parkinsonian motor signs. The Journals of Gerontology: Series A, 75(4), pp.696-701.

Smeha, L., Fassula, A.S., Moreno, Y.M.F., Gonzalez-Chica, D.A. and Nunes, E.A., 2022. Dietary acid load is positively associated with insulin resistance: a population-based study. Clinical Nutrition ESPEN.

Todorov, I. and Durova, K., 2020. The Fiscal Policy of Bulgaria from the Standpoints of the Business Cycle and the Twin Deficits Hypothesis. Journal of Tax Reform, 6(3), pp.256-269.

Xie, M., Xie, D., Yang, Y., Zhang, Y., Li, K., Zhou, B., Yang, Z., Ding, X. and Li, H., 2019. Association of high-sensitivity C-reactive protein in middle-aged and elderly Chinese people with hyperuricaemia and risk of coronary heart disease: a cross-sectional study. BMJ open, 9(10), p.e028351.

Zhan, Y., Wu, C.A., Qu, Y., Yue, H., Shi, Y., Chen, Y., Liu, X., Liu, R., Lyu, T., Jing, A. and Meng, Y., 2022. Longitudinal association of maternal dietary patterns with antenatal depression: Evidence from the Chinese Pregnant Women Cohort Study. Journal of Affective Disorders.