Three Decades of Current Account Adjustments

Dubravko Mihaljek ()

Comparative Economic Studies, 2013, vol. 55, issue 2, 267-285

Abstract: This paper analyses evidence on macroeconomic adjustments to large changes in current account imbalances – both deficits and surpluses. It studies annual data on key macroeconomic variables for 26 advanced and emerging market economies (EMEs) between 1980 and 2012. We find that large reductions in deficits are associated with lower GDP growth and employment and vice versa. Large reductions in surpluses of EMEs are associated with higher GDP growth and employment than large increases in surpluses. A significant global rebalancing could be achieved if major economies implemented adjustments in line with their own recent experience.

Date: 2013
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