Current Account Imbalances: Can Structural Policies Make a Difference?

35 Pages Posted: 25 Mar 2012

See all articles by Anna Ivanova

Anna Ivanova

International Monetary Fund (IMF) - European Department

Date Written: February 2012

Abstract

The discussion of global and regional imbalances has put the spotlight on the possible link between current accounts and structural policies. Drawing on standard empirical current account models, the paper finds that the commonly recommended structural factors cannot explain the widening of imbalances prior to the 2008 - 09 crisis. That said, structural factors do help explain some part of long-standing cross-country differences in the current account levels. In particular, countries with stricter credit market regulation, higher taxes on businesses, lower minimum wage (in particular,in slow growing economies) and generous unemployment benefits tend to have higher current account balances than others.

Keywords: Structural Policies, Imbalances, Current Account Balances, Economic Models

Suggested Citation

Ivanova, Anna, Current Account Imbalances: Can Structural Policies Make a Difference? (February 2012). IMF Working Paper No. NO.12/61. Available at SSRN: https://ssrn.com/abstract=2028237

Anna Ivanova (Contact Author)

International Monetary Fund (IMF) - European Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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