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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 macro-economic 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.

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File URL: http://www.dnb.nl/binaries/Working%20Paper%20No%20111-2006_tcm46-146768.pdf
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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 111.

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Date of creation: Aug 2006
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Handle: RePEc:dnb:dnbwpp:111

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Keywords: Current account adjustment; US; forecasting reversals;

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Cited by:
  1. Pancaro, Cosimo, 2013. "Current account reversals in industrial countries: does the exchange rate regime matter?," Working Paper Series 1547, European Central Bank.
  2. Barry Eichengreen & Gisela Rua, 2011. "Exchange Rates and Global Rebalancing," Macroeconomics Working Papers 23258, East Asian Bureau of Economic Research.
  3. Algieri, Bernardina & Bracke, Thierry, 2007. "Patterns of current account adjustment: insights from past experience," Working Paper Series 0762, European Central Bank.
  4. 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.
  5. Blaise Gnimasoun & Valérie Mignon, 2013. "Current-account adjustments and exchange-rate misalignments," EconomiX Working Papers 2013-31, University of Paris West - Nanterre la Défense, EconomiX.
  6. 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.

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