Growth Following Investment and Consumption-Driven Current Account Crises

Alexander Klemm

No 2013/217, IMF Working Papers from International Monetary Fund

Abstract: Current account deficits imply increasing liabilities to the rest of the world. External sustainability then depends on whether these can be met in the future without defaulting, i.e., normally through trade account surpluses. To run such surpluses without a fall in consumption, capital inflows should be used to increase future output. This paper tentatively finds that current account deficits reversals that follow investment booms are marked by better growth performance than those following consumption booms. It also shows that many recent large current account deficits have been predominantly the result of consumption or non-productive investment booms.

Keywords: WP; current account deficit; deficit; investment; Current Account; Savings; Consumption; Consumption-Driven current account crisis; current account reversal; investment share; current account outcome; current account events; current account adjustment; deficit episode; deficits in Argentina; Current account deficits; Current account imbalances; Current account surpluses; Europe; Global (search for similar items in EconPapers)
Pages: 23
Date: 2013-10-23
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Citations: View citations in EconPapers (1)

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