Current Account Imbalances in AsEAN Countries: Are they a Problem?
IMF Working Papers, April 1, 1997
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Bibliographic details
- Authors: Jonathan David Ostry
- Published: April 1, 1997
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451847079.001
Summary / Principal Finding
- Applying a consumption-smoothing model to five ASEAN countries reveals that excessive private consumption has not tended to characterize their widening external imbalances in recent years, except to a small degree in Indonesia and Malaysia.
- Even when the current account deficit appears sustainable, there is a case to reduce them in order to lower the risks arising from other factors.
Factors Influencing Desirability of Large External Deficits
- Level and composition of external liabilities.
- Flexibility of macroeconomic policies.
- Health of banking systems.
- Implication: beyond consumption-smoothing behavior, these factors affect whether large current account deficits are problematic.
Policy Implications and Recommendations
- Assess current account deficits not only for consumption-smoothing motives but also for vulnerabilities stemming from external liability structures, macro policy flexibility, and banking-system health.
- Where deficits are sustainable but vulnerabilities are present, consider policies to reduce deficits to lower associated risks.
Content in this bundle
- Current Account Imbalances in AAEAN Countries: Are They a Problem? - WP/97/51