Experiences with Current Account Deficits in Southeast Asia
In: Current Account and External Financing
AbstractIn the 1990s, Southeast Asia experienced very rapid growth along with large and persistent current account deficits. The episode lasted from 1990 to around 1996, ending up with the outbreak of the Asian crisis in 1997â98. The current account reversals to surpluses were associated with sudden stops in capital inflows. These inflows significantly exceeded current account deficits in the first half of the 1990s; however they had not yet recovered their pre-crisis levels by 2006. The Southeast Asian sudden stop episode was also associated to sharp contractions in output that were unprecedented in Asia over the sample period. These declines in output were followed by relatively quick recoveries but permanently lower growth rates. This paper documents and analyzes the historical experience of Southeast Asian countries regarding their current account deficits. This experience illustrates how high growth rates can be associated with significant external and domestic vulnerabilities. It is suggested that for these countriesâ experience, high rates of investment spending driving the current account cycle and increasing financial fragility were key determining factors.
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This chapter was published in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.) Current Account and External Financing, , chapter 14, pages 537-582, 2008.
This item is provided by Central Bank of Chile in its series Central Banking, Analysis, and Economic Policies Book Series with number v12c14pp537-582.
Other versions of this item:
- Ramon Moreno, 2007. "Experiences With Current Account Deficits in Southeast Asia," Working Papers Central Bank of Chile 452, Central Bank of Chile.
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