Published In

Journal of International Money and Finance

Document Type

Pre-Print

Publication Date

3-2022

Subjects

Net Foreign Assets

Abstract

Global current account imbalances have reappeared, although the extent and distribution of these imbalances are noticeably different from those experienced in the middle of the last decade. What does that recurrence mean for our understanding of the origin and nature of such imbalances? Will imbalances persist over time? Informed by empirical estimates of the determinants of current account imbalances encompassing the period after the global recession, we find that – as before – the observable manifestations of the factors driving the global saving glut have limited explanatory power for the time series variation in imbalances. Fiscal factors determine imbalances, and have accounted for a noticeable share of the recent variation in imbalances, including in the U.S. and Germany. For advanced economies, the financial component of the current account has been playing an increasing role in determining the movements of the account. Examining observable policy actions, it is clear that net official flows have been associated with some share of imbalances, although tracing out the motivations for intervention is difficult. Looking forward, it is clear that policy can influence global imbalances, although some component of the U.S. deficit will likely remain given the U.S. role in generating safe assets.

Rights

© 2019 by Menzie D. Chinn and Hiro Ito. All rights reserved.

Description

This is the author’s version of a work that was accepted for publication in Journal of International Money and Finance, 121. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of International Money and Finance, 121. https://doi.org/10.1016/j.jimonfin.2021.102510

DOI

10.1016/j.jimonfin.2021.102510

Persistent Identifier

https://archives.pdx.edu/ds/psu/37808

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