Growth Following Investment and Consumption-Driven Current Account Crises

October 23, 2013

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Format: Chicago

Alexander D Klemm. Growth Following Investment and Consumption-Driven Current Account Crises, (USA: International Monetary Fund, 2013) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Balance of payments, Consumption, Current account, Current account deficits, Current account imbalances, Current account surpluses, National accounts

Keywords: Consumption, Consumption-Driven current account crisis, Current Account, Current account adjustment, Current account deficit, Current account deficits, Current account events, Current account imbalances, Current account outcome, Current account reversal, Current account surpluses, Deficit, Deficit episode, Deficits in Argentina, Europe, Global, Investment, Investment share, Savings, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/217
Stock No:

WPIEA2013217
ISBN:

9781484321898
ISSN:

1018-5941

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