Current Accounts: What Is Their Relevance for Economic Policymaking?

Fabio Scacciavillani and Malcolm Knight

No 1998/071, IMF Working Papers from International Monetary Fund

Abstract: This paper surveys the main theoretical approaches for analyzing movements in the current account of the balance of payments, from the Mundell-Fleming paradigm to modern intertemporal approaches. It discusses the main implications of these analyses for policymaking, highlighting that modern economic theory views current account imbalances not simply as a reflection of goods market developments, but also as an outcome of intertemporal consumption and investment choices and associated capital market behavior. To reflect on the policy strategies applied under diverse circumstances, the paper analyzes the recent experiences of Italy, Israel, and Pakistan.

Keywords: WP; exchange rate; balance of payments; fiscal policy; Current account; current account sustainability; Italy; Israel; Pakistan; current account position; savings-investment gap; foreign currency; utility function; cost of capital; excess demand; price level; international economics; current account misalignment; Current account balance; Current account deficits; Real exchange rates; Exchange rates; Eastern Europe; Global (search for similar items in EconPapers)
Pages: 41
Date: 1998-05-01
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Citations: View citations in EconPapers (17)

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