Persistent current account deficits: A warning signal?

Gian Maria Milesi-Ferretti*, Assaf Razin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

When should persistent current account deficits be of concern to policymakers? We address this question by developing a framework for analysing current account sustainability, that explicitly takes into account willingness to pay and willingness to lend in addition to intertemporal solvency. This framework helps understand a variety of country experiences with protracted current account imbalances. We identify a number of sustainability indicators related to the structure of the economy, the economic policy stance, and political economy factors, and use them to evaluate the experience of countries that suffered external crises and of others that avoided them.

Original languageEnglish
Pages (from-to)161-181
Number of pages21
JournalInternational Journal of Finance and Economics
Volume1
Issue number3
DOIs
StatePublished - 1996

Keywords

  • Current account
  • Openness
  • Solvency
  • Sustainability

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