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What Do Current Account Reversals in OECD Countries Tell Us About the US Case?

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  • Leo de Haan
  • Hubert Schokker
  • Anastassia Tcherneva

Abstract

This study examines macroeconomic developments around reversals in current account deficits in 29 OECD countries over four decades and draws some inferences for the present US deficit. Estimates of a probit model indicate that the deepness of the deficit itself, absence of spare production capacity and a beginning real depreciation are factors that increase the likelihood of a current account reversal in the following year. For the US each of these three indicators of a reversal are now on, making a near reversal probable. Over the past 40 years half of the current account deficit reversals in the OECD area were followed by a recession in the countries concerned. Copyright 2007 The Authors.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal World Economy.

Volume (Year): 31 (2008)
Issue (Month): 2 (02)
Pages: 286-311

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Handle: RePEc:bla:worlde:v:31:y:2008:i:2:p:286-311

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Cited by:
  1. Eichengreen, Barry & Rua, Gisela, 2011. "Exchange Rates and Global Rebalancing," ADBI Working Papers 278, Asian Development Bank Institute.
  2. Bernardina Algieri & Thierry Bracke, 2011. "Patterns of Current Account Adjustment—Insights from Past Experience," Open Economies Review, Springer, vol. 22(3), pages 401-425, July.
  3. Theofilakou, Nancy & Stournaras, Yannis, 2012. "Current account adjustments in OECD countries revisited: The role of the fiscal stance," Journal of Policy Modeling, Elsevier, vol. 34(5), pages 719-734.
  4. Blaise Gnimassoun & Valérie Mignon, 2013. "Current-Account Adjustments and Exchange-Rate Misalignments," Working Papers 2013-29, CEPII research center.
  5. Algieri, Bernardina & Bracke, Thierry, 2007. "Patterns of current account adjustment: insights from past experience," Working Paper Series 0762, European Central Bank.
  6. Pancaro, Cosimo, 2013. "Current account reversals in industrial countries: does the exchange rate regime matter?," Working Paper Series 1547, European Central Bank.

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