Current Account Imbalances: Can Structural Policies Make a Difference?

Author/Editor: Ivanova, Anna
Publication Date: February 01, 2012
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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.
Series: Working Paper No. 12/61
Subject(s): Cross country analysis | Current account balances | Economic models | Fiscal policy | Monetary policy

Author's Keyword(s): Current account | structural policies | imbalances
Publication Date: February 01, 2012
Format: Paper
Stock No: WPIEA2012061 Pages: 34
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