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International Monetary Fund. External Relations Dept.

Economics, Royal Swedish Academy of Sciences This new journal, firmly positioned at the intersection of economics, environment and development, publishes papers addressed equally to the research and to the policy communities and is designed to be accessible to a broad readership. The Editor and Associate Editors are supported by distinguished panels of advisors from around the world, who will together ensure that the journal becomes a major forum for key research conducted in low-income countries themselves as well as elsewhere. The journal is divided into two main

International Monetary Fund. Research Dept.

In recent years, few subjects have attracted more attention from the research, financial, and policy communities than the causes of the large U.S. current account deficit—which now absorbs about three-fourths of available world surpluses—and its implications for the global economy. Yet, there is still little consensus on either how long current imbalances may be sustained or the channels through which adjustment could take place, and in particular on the role of exchange rates in the unwinding of the imbalances. Some argue that the current imbalances can be

Mr. Tamim Bayoumi, Mr. Hamid Faruqee, Mr. Douglas Laxton, Mr. Philippe D Karam, Mr. Alessandro Rebucci, Mr. Jaewoo Lee, Mr. Benjamin L Hunt, and Mr. Ivan Tchakarov

models is provided in Figure 2.1 . A new theoretical insight (such as rational expectations) with strong policy implications is developed in academia in response to evolving policy challenges and the limitations of existing models. Once these ideas have been distilled to the point where they are able to fit the data reasonably, they form the basis for large policy models, starting with single-country versions and then extending to a multicountry setting. Subsequently, the academic and policy communities refine these ideas and the paradigm becomes increasingly dominant