Working Paper: NBER ID: w14453
Authors: Joshua Aizenman; Yothin Jinjarak
Abstract: This paper evaluates the degree to which current account patterns are explained by the variables suggested by the literature, and reflects on possible future patterns. We start with panel regressions explaining the current account of 69 countries during 1981-2006. We identify an asymmetric effect of the US as the "demander of last resort:" a 1% increase in the lagged US current account deficit is associated with 0.5% increase of current account surpluses of countries running surpluses, but with insignificant changes of current account deficits of countries running deficits. Overall, the panel regressions account for not more than 2/3 of the variation. We apply the regression results to assess China's current account over the next six years, projecting a large drop in its account/GDP surpluses.
Keywords: current account; China; US; global imbalances
JEL Codes: F15; F32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US current account deficit (F32) | current account surpluses of countries running surpluses (F32) |
| US current account deficit (F32) | current account deficits of countries running deficits (F32) |