Sustainable and Excessive Current Account Deficits
AbstractLarge current account deficits are often assumed to play an important role in the propagation of financial crises in emerging markets in receipt of heavy private capital inflows. This paper reaches some major conclusions. First , the Lawson Doctrine â according to which current account deficits that result from a shift in private-sector behaviour should not be a public policy concern â has been discredited by recent currency crises in Latin America and Asia. Second , it is possible to define the size of current account deficits that should be sustainable in the long run. Third , the intertemporal approach to the current account does not provide a reliable benchmark to define when deficits become âexcessiveâ. Fourth , large external deficits should be resisted if unsustainable currency appreciation, excessive risk-taking in the banking system and a sharp drop in private savings are seen to coincide ... Les dÃ©ficits de la balance des opÃ©rations courantes sont-ils largement responsables de la propagation des crises financiÃ¨res dans les marchÃ©s Ã©mergents qui reÃ§oivent des flux importants de capitaux privÃ©s ? Ce document prÃ©sente plusieurs rÃ©sultats de recherche relatifs Ã ce problÃ¨me. PremiÃ¨rement , la doctrine de Lawson â selon laquelle les politiques publiques ne devraient pas se soucier des dÃ©ficits des comptes courants liÃ©s aux comportements incohÃ©rents du secteur privÃ© â a Ã©tÃ© discrÃ©ditÃ©e par les crises monÃ©taires qui ont rÃ©cemment frappÃ© lâAsie et lâAmÃ©rique latine. DeuxiÃ¨mement , il est possible de prÃ©ciser quel niveau de dÃ©ficit des comptes courants est tenable Ã long terme. TroisiÃ¨mement , on ne peut se fier Ã une approche intertemporelle pour dÃ©finir le seuil Ã partir duquel les dÃ©ficits deviennent Â« excessifs Â». QuatriÃ¨mement, il faut Ã©viter les dÃ©ficits extÃ©rieurs importants lorsque la monnaie est surÃ©valuÃ©e, que le secteur bancaire prend trop de risques et que lâon observe ...
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Bibliographic InfoArticle provided by Springer in its journal Empirica.
Volume (Year): 25 (1998)
Issue (Month): 2 (January)
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Web page: http://www.springerlink.com/link.asp?id=100261
Current account deficits; private capital flows;
Other versions of this item:
- Reisen, H, 1997. "Sustainable and Excessive Current Account Deficits," Research Paper 133, World Institute for Development Economics Research.
- Helmut Reisen, 1998. "Sustainable and Excessive Current Account Deficits," OECD Development Centre Working Papers 132, OECD Publishing.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
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