The Significance of the Current Account: Implications of European Financial Integration

April 1, 1990

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Format: Chicago

Lazaros E. Molho The Significance of the Current Account: Implications of European Financial Integration, (USA: International Monetary Fund, 1990) accessed September 23, 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

This paper reasseses the significance of persistent current imbalances as they become easier to finance in the process of European integration. After highlighting some limitations of simple saving-investment guidelines for policies toward the current account, the paper shows that an economy’s current account position may be an indicator of its attitude toward risk. Externalities in the incidence of risk could warrant government concern over current imbalances, even if they are caused by privately motivated investment and saving decisions. Such externalities may arise from credit markets’ conventional perceptions about country risk and from existing deposit insurance arrangements.

Subject: Balance of payments, Consumption, Current account, Current account deficits, Current account imbalances, External debt, National accounts

Keywords: Consumption, Current account, Current account deficit, Current account deficits, Current account imbalances, Deficit country, Europe, Gold standard, Investment-saving gap, Private sector, Saving-investment approach, Saving-investment framework, Saving-investment rule, Southern Europe, WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1990/030
Stock No:

WPIEA0301990
ISBN:

9781451980196
ISSN:

1018-5941

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