NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Sustainability of Persistent Current Account Deficits

Gian Maria Milesi-Ferrett, Assaf Razin

NBER Working Paper No. 5467 (Also Reprint No. r2100)
Issued in February 1996
NBER Program(s):   IFM

This paper puts forward a notion of current account sustainability that explicitly takes into account willingness to pay and willingness to lend in addition to intertemporal solvency. It argues that this notion of sustainability provides a better framework for understanding the variety of country experiences with protracted current account imbalances. Based on this notion, we identify a number of operational indicators related to the structure of the economy, the economic policy stance, and political economy factors. We use these sustainability indicators to evaluate the experience of a number of countries that ran persistent current account imbalances, and derive policy implications consistent with our notion of sustainability.

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Document Object Identifier (DOI): 10.3386/w5467

Published: International Journal of Finance Economics, vol. 1, no. 3, pp. 161-181, July 1996.

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