(Why) Should Current Account Balances Be Reduced?

By Olivier J. Blanchard, G. Milesi-Ferretti. IMF Economic Review, 2011

171 citations recorded by the source corpus.

The purpose of this note is to discuss two complex issues. First, why might a country want to reduce its current account deficit or surplus? And second, why might the international community ask for more? We argue that, in many cases, current account balances reflect underlying domestic distortions. It is then in the interest of the country to remove those distortions and, in the process, reduce imbalances. We then discuss cases where spillover effects, either from deficits or surpluses, suggest a direct role for multilateral surveillance. This process can play two potentially useful roles: first, as a discussion of the differences in assessments; second, as a potentially useful commitment device for countries to implement some of the required but politically unpalatable fiscal or structural adjustments.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/20f30732fa02c3cbcbeb92707c9e649dbb68f921

How researchers see this paper

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In Economics and Econometrics

1. Luís A. V. Catão
2. Rudolfs Bems
3. Luca A Ricci
4. J. D. Giovanni
5. Robert C. Johnson

In Finance

1. Luís A. V. Catão
2. Luca A Ricci
3. J. D. Giovanni

Citations in the corpus

• The External Balance Assessment (EBA) Methodology (2013, background): “20 Other recent work also links the CA with reserve accumulation via panel regressions, with different specifications: Gagnon (2011, 2012, and 2013), Bayoumi and Saborowski (2012), and Reinhardt, Ricci, and Tressel (2010). A notable difference in results is that Gagnon’s analysis does not find a rol”