Current Account Imbalances: Can Structural Policies Make a Difference?

February 1, 2012

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Format: Chicago

Anna Ivanova. Current Account Imbalances: Can Structural Policies Make a Difference?, (USA: International Monetary Fund, 2012) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The discussion of global and regional imbalances has put the spotlight on the possible link between current accounts and structural policies. Drawing on standard empirical current account models, the paper finds that the commonly recommended structural factors cannot explain the widening of imbalances prior to the 2008 - 09 crisis. That said, structural factors do help explain some part of long-standing cross-country differences in the current account levels. In particular, countries with stricter credit market regulation, higher taxes on businesses, lower minimum wage (in particular,in slow growing economies) and generous unemployment benefits tend to have higher current account balances than others.

Subject: Balance of payments, Current account, Current account balance, Current account surpluses, Employment protection, Labor, Macrostructural analysis, Structural policies

Keywords: Credit market, Credit market regulation index, Current account, Current account balance, Current account reduction, Current account regression, Current account surplus, Current account surpluses, Current account to GDP, Employment protection, Employment protection index, Global, Imbalances, OECD country, OECD employment protection index, OECD sample, Product market regulation, Protection index, Replacement ratio, Structural policies, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/061
Stock No:

WPIEA2012061
ISBN:

9781463937799
ISSN:

1018-5941

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