NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Aspects of the Current Account Behavior of OECD Economies

Jeffrey D. Sachs

NBER Working Paper No. 859
Issued in February 1982
NBER Program(s):   ITI   IFM

This essay examines some aspects of capital flows within the OECD, and outlines a framework for analyzing current account movements. In both the theoretical and empirical sections, I argue for the importance of including investment and growth in analyses of the current account. I present empirical evidence confirming that shifts in investment rates explain a large part of recent OECD current account behavior. In addition, the links in theory and practice between exchange rates and the current account are scrutinized. A link between current account deficits and depreciation is evident for the large OECD economies, but not for many smaller European economies. It appears that the exchange rate behavior in the smaller economies can be explained by specific exchange rate policies in these economies.

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