A Forensic Analysis of Global Imbalances

Abstract

The authors use updated data to re-examine the determinants of current account balances. They find that changes in budget balances in 2008-09 appear to have an effect in advanced current account deficit countries such as the United States and the United Kingdom. Stock market performance and real housing appreciation explain unusual current account balances in 2006-08. The findings suggest that unless countries implement substantial policy changes, the global imbalances are unlikely to disappear.