Purchase - $30.00

(Why) Should Current Account Balances Be Reduced?

12 Pages Posted: 14 Mar 2012  

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peter G. Peterson Institute for International Economics

Gian Maria Maria Milesi-Ferretti

International Monetary Fund (IMF); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2012

Abstract

The purpose of this note is to discuss two complex issues. First, why might a country want to reduce its current account deficit or surplus? And second, why might the international community ask for more? We argue that, in many cases, current account balances reflect underlying domestic distortions. It is then in the interest of the country to remove those distortions and, in the process, reduce imbalances. We then discuss cases where spillover effects, either from deficits or surpluses, suggest a direct role for multilateral surveillance. This process can play two potentially useful roles: first, as a discussion of the differences in assessments; second, as a potentially useful commitment device for countries to implement some of the required but politically unpalatable fiscal or structural adjustments.

Suggested Citation

Blanchard, Olivier J. and Milesi-Ferretti, Gian Maria Maria, (Why) Should Current Account Balances Be Reduced? (April 2012). IMF Economic Review, Vol. 60, Issue 1, pp. 139-150, 2012. Available at SSRN: https://ssrn.com/abstract=2021700 or http://dx.doi.org/10.1057/imfer.2012.2

Olivier J. Blanchard (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Gian Maria Maria Milesi-Ferretti

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

International Monetary Fund (IMF) ( email )

700 19th Street NW
Room 9-700
Washington, DC 20431
United States
202-623-7441 (Phone)
202-589-7441 (Fax)

Paper statistics

Downloads
1
Abstract Views
726