External Adjustment and the Global Crisis

Gian Maria Milesi-Ferretti () and Philip Lane

No 2011/197, 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: WP; current account gap; exchange rate; Global crisis; current account; exchange rate regime; current account adjustment; gap measure; GDP ratio; gap effect; Current account balance; Exchange rate arrangements; Real exchange rates; Current account deficits; Global; Baltics (search for similar items in EconPapers)
Pages: 38
Date: 2011-08-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=25169 (application/pdf)

Related works:
Journal Article: External adjustment and the global crisis (2012)
Chapter: External Adjustment and the Global Crisis (2011)
Working Paper: External Adjustment and the Global Crisis (2011)
Working Paper: External Adjustment and the Global Crisis (2011)
Working Paper: External Adjustment and the Global Crisis (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2011/197

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().