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What Do Current Account Reversals in OECD Countries Tell Us About the US Case?
Author(s) -
De Haan Leo,
Schokker Hubert,
Tcherneva Anastassia
Publication year - 2008
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2007.01070.x
Subject(s) - current account , economics , depreciation (economics) , recession , macroeconomics , probit model , keynesian economics , monetary economics , econometrics , exchange rate , economic growth , human capital , financial capital , capital formation
This study examines macroeconomic developments around reversals in current account deficits in 29 OECD countries over four decades and draws some inferences for the present US deficit. Estimates of a probit model indicate that the deepness of the deficit itself, absence of spare production capacity and a beginning real depreciation are factors that increase the likelihood of a current account reversal in the following year. For the US each of these three indicators of a reversal are now on, making a near reversal probable. Over the past 40 years half of the current account deficit reversals in the OECD area were followed by a recession in the countries concerned.