Current Account Sustainability and Relative Reliability

Stephanie E. Curcuru, Charles Thomas and Francis Warnock

No 14295, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The sustainability of the large and persistent U.S. current account deficits is one of the biggest issues currently being confronted by international macroeconomists. Some very plausible theories suggest that the substantial global imbalances can continue in a benign manner, other equally plausible theories predict a disorderly resolution, and in general it is very difficult to discern between competing theories. To inform the debates, we view competing theories through the perspective of the relative reliability of the data the theories rely on. Our analysis of the dark matter theory is cursory; from a relative reliability perspective, it fails as it is built on the assumption that an item that is largely unmeasured is the most accurate component of the entire set of international accounts. Similarly, the best data currently available suggest that U.S. returns differentials are much smaller than implied by the exorbitant privilege theory. Our analysis opens up questions about potential inconsistencies in the international accounts, which we address by providing rough estimates of various holes in the accounts.

JEL-codes: F3 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-cba and nep-opm
Note: IFM
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Citations: View citations in EconPapers (31)

Published as Frankel, Jeffrey and Christopher Pissarides (eds.) NBER International Seminar on Macroeconomics 2008. Chicago: University of Chicago Press, 2009.
Published as Current Account Sustainability and Relative Reliability , Stephanie E. Curcuru, Charles P. Thomas, Francis E. Warnock. in NBER International Seminar on Macroeconomics 2008 , Frankel and Pissarides. 2009

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Chapter: Current Account Sustainability and Relative Reliability (2009)
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