Current Accounts: What Is Their Relevance for Economic Policymaking?

By Fabio Scacciavillani, Malcolm D. Knight

May 1, 1998

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Fabio Scacciavillani, and Malcolm D. Knight Current Accounts: What Is Their Relevance for Economic Policymaking?, (USA: International Monetary Fund, 1998) accessed November 21, 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

This paper surveys the main theoretical approaches for analyzing movements in the current account of the balance of payments, from the Mundell-Fleming paradigm to modern intertemporal approaches. It discusses the main implications of these analyses for policymaking, highlighting that modern economic theory views current account imbalances not simply as a reflection of goods market developments, but also as an outcome of intertemporal consumption and investment choices and associated capital market behavior. To reflect on the policy strategies applied under diverse circumstances, the paper analyzes the recent experiences of Italy, Israel, and Pakistan.

Subject: Balance of payments, Current account, Current account balance, Current account deficits, Exchange rates, Foreign exchange, Real exchange rates

Keywords: Balance of payments, Cost of capital, Current account, Current account balance, Current account deficits, Current account misalignment, Current account position, Current account sustainability, Eastern Europe, Excess demand, Exchange rate, Exchange rates, Fiscal policy, Foreign currency, Global, International economics, Israel, Italy, Pakistan, Price level, Real exchange rates, Savings-investment gap, Utility function, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1998/071
Stock No:

WPIEA0711998
ISBN:

9781451849219
ISSN:

1018-5941

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