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Asset price booms and current account deficits


  • Paul R. Bergin


Before the global financial crisis of 2007–2009, the United States and several other countries posted large current account deficits. Many of these countries also experienced asset price booms. Evidence suggests the two developments were linked. Rising asset values in the United States permitted households to borrow more easily to boost consumption, while the net sale of debt securities abroad financed current account deficits. The fall in some asset prices since the crisis can make it easier to reduce current account imbalances.

Suggested Citation

  • Paul R. Bergin, 2011. "Asset price booms and current account deficits," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue dec.5.
  • Handle: RePEc:fip:fedfel:y:2011:i:dec.5:n:2011-37

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    References listed on IDEAS

    1. Klaus Adam & Pei Kuang & Albert Marcet, 2012. "House Price Booms and the Current Account," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 77-122.
    2. University of Chicago & Pedro Gete, 2009. "Housing Markets and Current Account Dynamics," 2009 Meeting Papers 427, Society for Economic Dynamics.
    3. Gete, Pedro, 2009. "Housing Markets and Current Account Dynamics," MPRA Paper 20957, University Library of Munich, Germany, revised 24 Feb 2010.
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    Cited by:

    1. Breeden, Joseph L. & Canals-Cerda, Jose J., 2016. "Consumer risk appetite, the credit cycle, and the housing bubble," Working Papers 16-5, Federal Reserve Bank of Philadelphia.
    2. Kucukali, Serhat, 2016. "Risk scorecard concept in wind energy projects: An integrated approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 56(C), pages 975-987.

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    Balance of payments ; Asset pricing;


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