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External Adjustment and the Global Crisis

Gian Maria Milesi-Ferretti () and Philip Lane

No 11/197, IMF Working Papers from International Monetary Fund

Abstract: After widening substantially in the period preceding the global financial crisis, current account imbalances across the world have contracted to a significant extent. This paper analyzes the factors underlying this process of external adjustment. It finds that countries whose pre-crisis current account balances were in excess of what could be explained by economic fundamentals have experienced the largest contractions in their external balance. External adjustment in deficit countries was achieved primarily through demand compression, rather than expenditure switching. Changes in other investment flows were the main channel of financial account adjustment, with official external assistance and ECB liquidity cushioning the exit of private capital flows for some countries.

Keywords: Current account; Foreign exchange; Global crisis, exchange rate regime, current account balances, current account adjustment, current account balance, current account deficits, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-ifn
Date: 2011-08-01
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Related works:
Journal Article: External adjustment and the global crisis (2012) Downloads
Chapter: External Adjustment and the Global Crisis (2011)
Working Paper: External Adjustment and the Global Crisis (2011) Downloads
Working Paper: External Adjustment and the Global Crisis (2011) Downloads
Working Paper: External Adjustment and the Global Crisis (2011) Downloads
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