Sharp Reductions in Current Account Deficits: An Empirical Analyis

Gian Maria Milesi-Ferretti () and Assaf Razin

No 6310, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study determinants and consequences of sharp reductions in current account" imbalances (reversals) in low- and middle-income countries. We try to answer two questions:" first, what triggers reversals? Second, what factors explain how costly reversals are? We find" that both domestic variables, such as the current account balance, openness and the level of" reserves, and external variables, such as terms of trade shocks, US real interest rates and growth" in industrial countries seem to play an important role in explaining reversals in current account" imbalances. We also find some evidence that countries with a less appreciated real exchange" rate, higher investment and openness prior to the reversal tend to grow faster after a reversal" occurs.

JEL-codes: F32 F34 (search for similar items in EconPapers)
Date: 1997-12
Note: IFM
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Citations: View citations in EconPapers (17)

Published as European Economic Review, Vol. 42, nos. 3-5 (May 1998): 897-908.

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Journal Article: Sharp reductions in current account deficits An empirical analysis (1998)
Working Paper: Sharp Reductions in Current Account Deficits: An Empirical Analysis (1997)
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