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1 2023

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Poland’s current account: the role of investment income balance

Bilewicz Ewa

Zeszyty Naukowe. Organizacja i Zarządzanie / Politechnika Śląska

2023

z. 175

61--70

Purpose: The paper aims to present the role of net investment income in the current account in Poland’s balance of payments and to investigate the main factors driving net investment income. Design/methodology/approach: The study uses quarterly, secondary data spanning from 2004 to 2022. The data gathered in the research were analysed using the ordinary least squares (OLS) regression. Findings: The empirical results of research show that the balance of investment income in the analysed period was characterized by a persistent deficit. The scale of the net investment income’ impact on the current account balance has increased. The income balance was mostly determined by the net foreign assets position while exchange rate had no significant effect. Practical implications: Understanding variables that influence country's net investment income is essential for designing appropriate economic policies aimed at ensuring external balance. The research results can be used to formulate policy recommendations, which help to minimalize vulnerabilities of external position of Poland. A policy suggestion is that in order to reduce imbalance between payments and receipts in investment income flows, efforts should be made towards promoting domestic investments abroad. Poland should also decrease dependence on external financing and increase reliance on domestic savings. In addition, the results of study provide a reasonable basis for further research on the influence of the investment income composition on the balance of income account. Originality/value: Until now, little research has been done about determinants of investment income balance. The study contributes to better understanding of changes in net investment income and dynamics of external position of Poland.