Revisiting External Imbalances: Insights from Sectoral Accounts

Cian Allen

2018 Papers from Job Market Papers

Abstract: This paper revisits the period of substantial widening of external imbalances in advanced economies in the run-up to the global financial crisis and their adjustment since then. We take a granular look at these imbalances through the lens of their domestic counterpart: the net financial balance of the household sector, the government, non-financial corporations, and financial corporations. Our findings challenge the often-claimed view that the household sector lies behind most of the dynamics of the current account. In fact, we show that it is the non-financial corporation and the government sectors that account for the bulk of: (i) the co-movement with the standard set of fundamental covariates of the current account; (ii) the external adjustment and expenditure reduction in the aftermath of the global financial crisis; and (iii) the diverging dynamics during large and persistent current account imbalances. These results emphasize that analyzing domestic sectoral balances can lead to a better empirical and theoretical understanding of global imbalances.

JEL-codes: E21 F31 F32 (search for similar items in EconPapers)
Date: 2018-11-07
New Economics Papers: this item is included in nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://ideas.repec.org/jmp/2018/pal913.pdf

Related works:
Journal Article: Revisiting external imbalances: Insights from sectoral accounts (2019)
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:jmp:jm2018:pal913

Access Statistics for this paper

More papers in 2018 Papers from Job Market Papers
Bibliographic data for series maintained by RePEc Team ().