Does a Current-Account Deficit Indicate Bad Economic Policy?

William Scarth ()
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William Scarth: McMaster University

Chapter Chapter 9 in Debates in Monetary Macroeconomics, 2022, pp 173-191 from Springer

Abstract: Abstract Policymakers should not always seek a current-account surplus because there are always several policy objectives. Whether a surplus is desirable depends on what is most important. In the long run, current-account variations can smooth domestic living standards. But whether a surplus is appropriate depends on which individuals we think are more ‘deserving’. The more we value future generations compared to current generations, and the less we care about income inequality, the more economic analysis supports a current-account surplus. It is not for analysts, however, to decide which groups in society should be valued more. Further, we cannot always focus on the long run. Full employment is not always easily achieved; short-run stabilization must also be considered.

Keywords: Competing policy objectives; Consumption smoothing; Current account surplus; Living standards; Stabilization policy (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-11240-9_9

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DOI: 10.1007/978-3-031-11240-9_9

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