Wednesday, May 12, 2010

Current account imbalances and fiscal policy

Current account imbalances and sustainability of fiscal policy are two of the most important challenges that the world economy has to deal with in the coming years. They are both linked by the national account identity that states that the current account balance of a country is the sum of the private balance between saving and investment and the government balance.

I spent some time at the IMF Fiscal Affairs department last year and as a result we produced an analysis of the empirical link between fiscal policy and the current account. Our goal was to analyze a broader sample of countries and to look at episodes of large changes, two issues that had not been studied before in this literature.

The copy of the working paper can be found at the IMF web site.

Antonio Fatás