Sustainability of Persistent Current Account Deficits
This paper puts forward a notion of current account sustainability that explicitly takes into account willingness to pay and willingness to lend in addition to intertemporal solvency. It argues that this notion of sustainability provides a better framework for understanding the variety of country experiences with protracted current account imbalances. Based on this notion, we identify a number of operational indicators related to the structure of the economy, the economic policy stance, and political economy factors. We use these sustainability indicators to evaluate the experience of a number of countries that ran persistent current account imbalances, and derive policy implications consistent with our notion of sustainability.
|Date of creation:||Feb 1996|
|Date of revision:|
|Publication status:||published as International Journal of Finance Economics, vol. 1, no. 3, pp. 161-181, July 1996.|
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