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Growth Following Investment and Consumption-Driven Current Account Crises
Author:
Mr. Alexander D Klemm
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Series:
IMF Working Papers
Volume/Issue:
Volume 2013: Issue 217
Language:
English
Publication Date:
23 Oct 2013
DOI:
https://doi.org/10.5089/9781484321898.001
ISBN:
9781484321898
ISSN:
1018-5941
Pages:
23
Keywords:
WP; current account deficit; deficit; investment; Current Account; Savings; Consumption; Consumption-Driven current account crisis; current account reversal; investment share; current account outcome; current account events; current account adjustment; deficit episode; deficits in Argentina; Current account deficits; Current account imbalances; Current account surpluses; Europe; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Current account deficits imply increasing liabilities to the rest of the world. External sustainability then depends on whether these can be met in the future without defaulting, i.e., normally through trade account surpluses. To run such surpluses without a fall in consumption, capital inflows should be used to increase future output. This paper tentatively finds that current account deficits reversals that follow investment booms are marked by better growth performance than those following consumption booms. It also shows that many recent large current account deficits have been predominantly the result of consumption or non-productive investment booms.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund