Are Australia's Current Account Deficits Excessive?

We examine episodes of current account adjustment in industrial countries over the past 30 years. We find that they were typically associated with a sizable growth slowdown and a large exchange rate depreciation. There was no discernible change in the nature of capital flows just prior to an adjustment. Hence, adjustments may be responding to the resolution of domestic imbalances rather than being an exogenous event. We show that global developments triggered the adjustment, possibly by triggering the unwinding of the domestic imbalances. Most of the ex post adjustment of the financial account was in private sector flows, primarily by foreign investors. Copyright � 2007 The Authors; Journal compilation � 2007 Blackwell Publishing Ltd.

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Are Australia's Current Account Deficits Excessive?

Abstract: This is aWorking Paper and the author(s) would welcome any comments on the present text. Citations should refer to a Working Paper of the International Monetary Fund. The views expressed are those of the author(s) and do not necessarily represent those of the Fund.

Cited by 3 publications

References 34 publications

Sharp reductions in current account deficits An empirical analysis

Sharp reductions in current account deficits An empirical analysis

An evaluation of the saving, investment, and current account balances of five ASEAN economies

Current Account Adjustment and Capital Flows*

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