Current account adjustment in industrialized countries
AbstractThis paper examines the dynamics of current account adjustment among industrialized countries. We identify twenty-five episodes in which a large sustained improvement in the current account occurred between 1980 and 1997. We find that a typical current account reversal begins when the current account deficit is about 5 percent of GDP, that it is associated with slowing income growth and a 10-20 percent real exchange rate depreciation. Real export growth, declining investment, and an eventual leveling off in both the net international investment position and the budget deficit-GDP ratio are also likely to be part of the adjustment. These results suggest that current account reversals in industrialized countries are largely a function of the business cycle.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 692.
Date of creation: 2000
Date of revision:
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gian-Maria Milesi-Ferretti & Assaf Razin, 1998.
"Current Account Reversals and Currency Crisis-Empirical Regularities,"
IMF Working Papers
98/89, International Monetary Fund.
- Gian Maria Milesi Ferretti & Assaf Razin, 2000. "Current Account Reversals and Currency Crises, Empirical Regularities," NBER Chapters, in: Currency Crises, pages 285-323 National Bureau of Economic Research, Inc.
- Gian Maria Milesi-Ferrett & Assaf Razin, 1998. "Current Account Reversals and Currency Crises: Empirical Regularities," NBER Working Papers 6620, National Bureau of Economic Research, Inc.
- Milesi-Ferretti, Gian Maria & Razin, Assaf, 1998. "Current Account Reversals and Currency Crises: Empirical Regularities," CEPR Discussion Papers 1921, C.E.P.R. Discussion Papers.
- Frankel, Jeffrey A. & Rose, Andrew K., 1996.
"Currency crashes in emerging markets: An empirical treatment,"
Journal of International Economics,
Elsevier, vol. 41(3-4), pages 351-366, November.
- Jeffrey A. Frankel & Andrew K. Rose, 1996. "Currency crashes in emerging markets: an empirical treatment," International Finance Discussion Papers 534, Board of Governors of the Federal Reserve System (U.S.).
- Hali J. Edison, 2003.
"Do indicators of financial crises work? An evaluation of an early warning system,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 8(1), pages 11-53.
- Hali J. Edison, 2000. "Do indicators of financial crises work? an evaluation of an early warning system," International Finance Discussion Papers 675, Board of Governors of the Federal Reserve System (U.S.).
- Catherine L. Mann, 1999. "Is the U.S. Trade Deficit Sustainable?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 47.
- Hamid Faruqee & Guy Debelle, 1996. "What Determines the Current Account? A Cross-Sectional and Panel Approach," IMF Working Papers 96/58, International Monetary Fund.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs) The email address of this maintainer does not seem to be valid anymore. Please ask Kris Vajs to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.