Current Account Sustainability: Selected East Asian and Latin American Experiences

A number of developing countries have run large and persistent current account deficits in both the late seventies/early eighties and in the early nineties, raising the issue of whether these persistent imbalances are sustainable. This paper puts forward a notion of current account sustainability and compares the experience of three Latin American countries -- Chile, Colombia and Mexico -- and three East Asian countries--Korea, Malaysia and Thailand. It identifies a number of potential sustainability indicators and discusses their usefulness in predicting external crises.