Current Account Imbalances Coming Back
AbstractThis paper finds statistically robust and economically important effects of fiscal policy, external financial policy, net foreign assets, and oil prices on current account balances. The statistical model builds upon and improves previous explanations of current account balances in the academic literature. A key advance is that the model captures the effect of external financial policies, including exchange rate policies, through data on net official financial flows. Based on current and expected future policies, current account imbalances in major G-20 economies are likely to widen much more in the next five years than projected by the International Monetary Fund (IMF). This paper concludes with a discussion of appropriate policies to prevent widening imbalances.
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Bibliographic InfoPaper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP11-1.
Date of creation: Jan 2011
Date of revision:
exchange rate; G-20; official financial flows; sterilized intervention;
Find related papers by JEL classification:
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-30 (All new papers)
- NEP-CBA-2011-01-30 (Central Banking)
- NEP-IFN-2011-01-30 (International Finance)
- NEP-MON-2011-01-30 (Monetary Economics)
- NEP-OPM-2011-01-30 (Open Economy Macroeconomics)
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