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Current Account Imbalances Coming Back

Joseph Gagnon

No WP11-1, Working Paper Series from Peterson Institute for International Economics

Abstract: This paper finds statistically robust and economically important effects of fiscal policy, external financial policy, net foreign assets, and oil prices on current account balances. The statistical model builds upon and improves previous explanations of current account balances in the academic literature. A key advance is that the model captures the effect of external financial policies, including exchange rate policies, through data on net official financial flows. Based on current and expected future policies, current account imbalances in major G-20 economies are likely to widen much more in the next five years than projected by the International Monetary Fund (IMF). This paper concludes with a discussion of appropriate policies to prevent widening imbalances.

Keywords: exchange rate; G-20; official financial flows; sterilized intervention (search for similar items in EconPapers)
JEL-codes: F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mon and nep-opm
Date: 2011-01
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Persistent link: https://EconPapers.repec.org/RePEc:iie:wpaper:wp11-1

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