Are Australia's Current Account Deficits Excessive?

Author/Editor:

C. John McDermott ; Paul Cashin

Publication Date:

August 1, 1996

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:

This paper compares the evolution of the Australian current account balance over the period 1954–94 against an optimal current account derived from a consumption-smoothing model. The findings indicate that the Australian current account was not used to smooth consumption optimally in the period prior to the relaxation of capital controls in the early 1980s. The results also suggest that in the period since the mid-1980s Australia’s current account deficits have become excessive, and that the increase in national saving required to satisfy its external borrowing constraint is about 2 to 4 percent of GDP.

Series:

Working Paper No. 96/85

Subject:

English

Publication Date:

August 1, 1996

ISBN/ISSN:

9781451850703/1018-5941

Stock No:

WPIEA0851996

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

28

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