Economics at your fingertips  

Revisiting external imbalances: Insights from sectoral accounts

Cian Allen ()

Economic Papers from Trinity College Dublin, Economics Department

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.

Keywords: current account; external adjustment; sectoral balance; flow of funds (search for similar items in EconPapers)
JEL-codes: E21 F31 F32 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2019-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)

Related works:
Journal Article: Revisiting external imbalances: Insights from sectoral accounts (2019) Downloads
Working Paper: Revisiting External Imbalances: Insights from Sectoral Accounts (2018) Downloads
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:

Access Statistics for this paper

More papers in Economic Papers from Trinity College Dublin, Economics Department Contact information at EDIRC.
Bibliographic data for series maintained by Colette Angelov ().

Page updated 2022-08-14
Handle: RePEc:tcd:tcduee:tep0519