IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

External Adjustment and the Global Crisis

Listed author(s):
  • Gian M Milesi-Ferretti
  • Philip R. Lane

After widening substantially in the period preceding the global financial crisis, current account imbalances across the world have contracted to a significant extent. This paper analyzes the factors underlying this process of external adjustment. It finds that countries whose pre-crisis current account balances were in excess of what could be explained by economic fundamentals have experienced the largest contractions in their external balance. External adjustment in deficit countries was achieved primarily through demand compression, rather than expenditure switching. Changes in other investment flows were the main channel of financial account adjustment, with official external assistance and ECB liquidity cushioning the exit of private capital flows for some countries.

If 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.

File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=25169
Download Restriction: no

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/197.

as
in new window

Length: 38
Date of creation: 01 Aug 2011
Handle: RePEc:imf:imfwpa:11/197
Contact details of provider: Postal:
International Monetary Fund, Washington, DC USA

Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
Email:


More information through EDIRC

Order Information: Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

References listed on IDEAS
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.:

as
in new window


  1. S M Ali Abbas & Jacques Bouhga-Hagbe & Antonio Fatás & Paolo Mauro & Ricardo C Velloso, 2011. "Fiscal Policy and the Current Account," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(4), pages 603-629, November.
  2. Menzie D. Chinn & Shang-Jin Wei, 2008. "A Faith-based Initiative: Does a Flexible Exchange Rate Regime Really Facilitate Current Account Adjustment?," NBER Working Papers 14420, National Bureau of Economic Research, Inc.
  3. Gianluca Benigno & Christoph Thoenissen, 2002. "Equilibrium exchange rates and supply-side performance," Bank of England working papers 156, Bank of England.
  4. Barry Eichengreen & Muge Adalet, 2005. "Current Account Reversals: Always a Problem?," NBER Working Papers 11634, National Bureau of Economic Research, Inc.
  5. Philip R Lane & Gian Maria Milesi-Ferretti, 2011. "The Cross-Country Incidence of the Global Crisis," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 59(1), pages 77-110, April.
  6. Gian-Maria Milesi-Ferretti & Cédric Tille, 2010. "The Great Retrenchment: International Capital Flows During the Global Financial Crisis," IHEID Working Papers 18-2010, Economics Section, The Graduate Institute of International Studies, revised 15 Sep 2010.
  7. Philip R. Lane & Gian M Milesi-Ferretti, 2001. "Long-Term Capital Movements," IMF Working Papers 01/107, .
    • Philip R. Lane & Gian Maria Milesi-Ferretti, 2002. "Long-Term Capital Movements," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 73-136 National Bureau of Economic Research, Inc.
  8. Joseph E. Gagnon, 2011. "Current Account Imbalances Coming Back," Working Paper Series WP11-1, Peterson Institute for International Economics.
  9. Morten Ravn & Stephanie Schmitt-Grohé & Martín Uribe, 2006. "Deep Habits," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 195-218.
  10. Ruo Chen & Gian M Milesi-Ferretti & Thierry Tressel, 2012. "External Imbalances in the Euro Area," IMF Working Papers 12/236, .
  11. Menzie D. Chinn & Eswar S. Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration," NBER Working Papers 7581, National Bureau of Economic Research, Inc.
  12. Charles Engel & John H. Rogers, 2006. "The U.S. Current Account Deficit and the Expected Share of World Output," NBER Working Papers 11921, National Bureau of Economic Research, Inc.
  13. 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.
  14. Obstfeld, Maurice & Rogoff, Kenneth S, 2005. "The Unsustainable US Current Account Position Revisited," Center for International and Development Economics Research, Working Paper Series qt4f63x50j, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  15. Backus, David K. & Kehoe, Patrick J. & Kydland, Finn E., "undated". "Backus_Kehoe_Kydland," Instructional Stata datasets for econometrics backus, Boston College Department of Economics.
  16. Aizenman, Joshua & Jinjarak, Yothin, 2009. "Current account patterns and national real estate markets," Journal of Urban Economics, Elsevier, vol. 66(2), pages 75-89, September.
  17. Gian M Milesi-Ferretti & Olivier J Blanchard, 2009. "Global Imbalances; In Midstream?," IMF Staff Position Notes 2009/29, International Monetary Fund.
  18. Richard H. Clarida, 2007. "G7 Current Account Imbalances: Sustainability and Adjustment," NBER Books, National Bureau of Economic Research, Inc, number clar06-2.
  19. Gruber, Joseph W. & Kamin, Steven B., 2007. "Explaining the global pattern of current account imbalances," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 500-522, June.
  20. Philip Lane, 2010. "International Differences in Fiscal Policy During the Global Crisis," The Institute for International Integration Studies Discussion Paper Series iiisdp336, IIIS.
  21. repec:ucp:bknber:9780226454627 is not listed on IDEAS
  22. Enrique G. Mendoza, 2010. "Sudden Stops, Financial Crises, and Leverage," American Economic Review, American Economic Association, vol. 100(5), pages 1941-1966, December.
  23. Jaewoo Lee & Jonathan David Ostry & Alessandro Prati & Luca A Ricci & Gian M Milesi-Ferretti, 2008. "Exchange Rate Assessments; CGER Methodologies," IMF Occasional Papers 261, International Monetary Fund.
  24. Caroline Freund & Frank Warnock, 2005. "Current Account Deficits in Industrial Countries: The Bigger They are, the Harder They Fall?," NBER Working Papers 11823, National Bureau of Economic Research, Inc.
  25. Kristin J. Forbes & Francis E. Warnock, 2011. "Capital Flow Waves: Surges, Stops, Flight, and Retrenchment," NBER Working Papers 17351, National Bureau of Economic Research, Inc.
  26. Menzie D. Chinn & Hiro Ito, 2005. "Current Account Balances, Financial Development and Institutions: Assaying the World "Savings Glut"," NBER Working Papers 11761, National Bureau of Economic Research, Inc.
  27. Philip R. Lane & Gian Maria Milesi-Ferretti, 2007. "Europe and global imbalances," Economic Policy, CEPR;CES;MSH, vol. 22, pages 519-573, 07.
  28. Atish R. Ghosh & Jonathan David Ostry & Charalambos G Tsangarides, 2011. "Exchange Rate Regimes and the Stability of the International Monetary System," IMF Occasional Papers 270, International Monetary Fund.
  29. Buti,Marco & Deroose,Servaas & Gaspar,Vitor & Martins,João Nogueira (ed.), 2010. "The Euro," Cambridge Books, Cambridge University Press, number 9789279098420, December.
  30. Olivier J. Blanchard & Mitali Das & Hamid Faruqee, 2010. "The Initial Impact of the Crisis on Emerging Market Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(1 (Spring), pages 263-323.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:11/197. See general 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: (Jim Beardow)

or (Hassan Zaidi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.