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Persistent Current Account Deficits: a Warning Signal?
Author(s) -
MilesiFerretti Gian Maria,
Razin Assaf
Publication year - 1996
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/(sici)1099-1158(199607)1:3<161::aid-ijfe19>3.0.co;2-w
Subject(s) - current account , solvency , economics , variety (cybernetics) , sustainability , warning system , macroeconomics , politics , public economics , political science , market liquidity , exchange rate , ecology , artificial intelligence , biology , computer science , law , engineering , aerospace engineering
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 sustainab ility 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.