TY  - JOUR
AU  - Aizenman,Joshua
AU  - Sun,Yi
TI  - Globalization and the Sustainability of Large Current Account Imbalances: Size Matters
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13734
PY  - 2008
Y2  - January 2008
UR  - http://www.nber.org/papers/w13734
L1  - http://www.nber.org/papers/w13734.pdf
N1  - Author contact info:
Joshua Aizenman
Department of Economics;  E2
1156 High St.
University of California, Santa Cruz
Santa Cruz, CA  95064
Tel: 831/459-4791
Fax: 831/459-5077
E-Mail: jaizen@ucsc.edu

Yi Sun
Economics E2
UCSC
Santa Cruz, CA, 95064
E-Mail: ysun@ucsc.edu
AB  - This paper evaluates the sustainability of large current account imbalances in the era when the Chinese GDP growth rate and current account/GDP exceed 10%. We investigate the size distribution and the durability of current account deficits during 1966-2005, and report the results of a simulation that relies on the adding-up property of global current account balances. Excluding the US, we find that size does matter: the length of current account deficit spells is negatively related to the relative size of the countries' GDP. We conclude that the continuation of the fast growth rate of China, while maintaining its large current account/GPD surpluses, would be constrained by the limited sustainability of the larger current account deficits/GDP of countries that grow at a much slower rate. Consequently, short of the emergence of a new "demander of last resort," the Chinese growth path would be challenged by its own success.
ER  -