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Current Account Imbalances

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  • Anna Ivanova

Abstract

The discussion of global and regional imbalances has put the spotlight on the possible link between current accounts and structural policies. Drawing on standard empirical current account models, the paper finds that the commonly recommended structural factors cannot explain the widening of imbalances prior to the 2008 - 09 crisis. That said, structural factors do help explain some part of long-standing cross-country differences in the current account levels. In particular, countries with stricter credit market regulation, higher taxes on businesses, lower minimum wage (in particular,in slow growing economies) and generous unemployment benefits tend to have higher current account balances than others.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/61.

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Length: 35
Date of creation: 01 Feb 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/61

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Keywords: Current account balances; Economic models; current account; current account balance; current accounts; current account surplus; current account surpluses; current account imbalances; current account deficits; capital account openness; capital account; private credit; current account adjustment; global current account imbalances; global current account; current account imbalance; investment income;

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References

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  1. Michael C. Burda & Jennifer Hunt, 2011. "What Explains the German Labor Market Miracle in the Great Recession?," NBER Working Papers 17187, National Bureau of Economic Research, Inc.
  2. Mike Kennedy & Torsten Sløk, 2005. "Are structural reforms the answer to global current account imbalances?," OECD Economic Studies, OECD Publishing, vol. 2005(2), pages 47-73.
  3. Lukas Vogel, 2011. "Structural reforms and external rebalancing in the euro area: a model-based analysis," European Economy - Economic Papers 443, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Shang-Jin Wei & Jiandong Ju, 2008. "Current Account Adjustment: Some New Theory and Evidence," 2008 Meeting Papers 851, Society for Economic Dynamics.
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Citations

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Cited by:
  1. Joong Shik Kang & Jay C. Shambaugh, 2013. "The Evolution of Current Account Deficits in the Euro Area Periphery and the Baltics," IMF Working Papers 13/169, International Monetary Fund.
  2. Luigi Bonatti & Andrea Fracasso, 2013. "The German Model and the European Crisis," Journal of Common Market Studies, Wiley Blackwell, vol. 51(6), pages 1023-1039, November.
  3. Bornhorst, Fabian & Mody, Ashoka, 2012. "Test of the German resilience," CFS Working Paper Series 2012/14, Center for Financial Studies (CFS).
  4. Steven Phillips & Luis Catão & Luca Antonio Ricci & Rudolfs Bems & Mitali Das & Julian di Giovanni & D. Filiz Unsal & Marola Castillo & Jungjin Lee & Jair Rodriguez & Mauricio Vargas, 2013. "The External Balance Assessment (EBA) Methodology," IMF Working Papers 13/272, International Monetary Fund.
  5. Patrice Ollivaud & Cyrille Schwellnus, 2013. "The Post-crisis Narrowing of International Imbalances: Cyclical or Durable?," OECD Economics Department Working Papers 1062, OECD Publishing.
  6. Michael Keen & Ruud A. de Mooij, 2012. "Fiscal Devaluation and Fiscal Consolidation," IMF Working Papers 12/85, International Monetary Fund.
  7. Fabian Bornhorst & Ashoka Mody, 2012. "Tests of German Resilience," IMF Working Papers 12/239, International Monetary Fund.
  8. Luigi Bonatti & Andrea Fracasso, 2012. "A Germans’ dilemma: save the euro or preserve their socio-economic model," Department of Economics Working Papers 1207, Department of Economics, University of Trento, Italia.

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