NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Current Account Reversals: Always a Problem?

Barry Eichengreen, Muge Adalet

NBER Working Paper No. 11634
Issued in September 2005
NBER Program(s):   DAE   IFM   ME

Using panel data and case studies, we analyze the pre-1970 history of international capital flows and current account reversals. Considering a sample of emerging markets and advanced economies with per capita GDPs at least 60 per cent those of the lead country, we show that the incidence of reversals has been unusually great in recent years. The only prior period that matched the last three decades in terms of the frequency and magnitude of reversals was the 1920s and 1930s, decades notorious for the instability of capital flows. In contrast, reversals were both less common and smaller in the Bretton Woods and pre-World War I gold standard eras.

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Document Object Identifier (DOI): 10.3386/w11634

Published: Current Account Reversals: Always a Problem?, Muge Adalet, Barry Eichengreen. in G7 Current Account Imbalances: Sustainability and Adjustment, Clarida. 2007

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