Demand adjustments in large current account imbalances?

Other macroeconomic policies of all kinds influence the current account balance.

So, how will the European Union distinguish between good current account deficits a government creates a favorable business climate, generating inflows of foreign direct investment and bad current account deficits?

Indeed, countries from Singapore to Russia are running large surpluses.

So, how will the European Union distinguish between good current account deficits a government creates a favorable business climate, generating inflows of foreign direct investment 160 and bad current account deficits?

Ukraine s international reserves are a reassuring 26 billion, roughly one quarter of the country s GDP.

As the national saving rate has come down, so has the current account surplus.

The current account deficit has been almost eliminated, and the banking crisis contained.

Given China s massive current account surplus (12 of GDP), the renminbi is still undervalued.

Similarly, Russia s current account balance has been mostly in surplus in recent years.

One key issue facing China is how to reduce the current and capital account surpluses in order to reduce foreign exchange holdings.

Sweden accumulated a current account surplus of 53 of GDP, in contrast to America s 48 of GDP deficit.

The ever rising current account deficit (6.8 of GDP in 2010) will require a second round of reforms.

Leading Bush administration officials used to talk of the US current account deficit being a gift to the outside world.

Indeed, only those countries that were running large current account deficits before the crisis were affected by it.

In the last 60 years, the US has underpinned global growth by running persistent current account deficits.

Doesn t the country s persistent current account deficit reflect excessive consumption, rather than weak effective demand?

The current account balance deteriorated rapidly, owing to the loss of more than 4 billion in tourism revenues and a sharp fall in remittances by Egyptian workers abroad.

A country with current account and capital account surpluses and increasing foreign exchange reserves normally sees an excessive money supply and high inflation.

While all of this is happening in Europe s south, most of the northern countries are running current account surpluses.

Its current account surplus peaked, before the financial crisis of 2008, at around 11 of GDP.

After all, America s still large current account deficit guarantees that the dollar will continue to fall.

But the reverse is also true as soon as the current account swings to surplus, the pressure from financial markets abates.

Since 2007, the US current account deficit has narrowed, but not because of a higher savings rate.

For starters, Latvia, like the other Baltic states, was running an enormous current account deficit when the crisis started.

Though overall economic activity is weak, the current account deficit has reached a 12 year high of 3.5 of GDP.

The large gap between US and foreign long term interest rates that should emerge from and signal expectations of a falling dollar does not exist.

With the current account deficit now exceeding 5 of GDP, US foreign debt is rising fast.

And the 65 billion needed every month to fund the US current account deficit continues to flow in.

As a result, emerging market countries, aiming to ensure that they avoidneeding financial support from the IMF in the foreseeable future, are increasingly following China s lead and trying to ensure that they, too, run current account surpluses.

On the other hand, foreign criticism of Germany for running a current account surplus similar to China s is unfounded.

Moreover, the peripheral countries large current account deficits, fueled as they were by excessive consumption, were accompanied by economic stagnation and loss of competitiveness.

Indeed, the world itself cannot afford the disappearance of the US current account deficit at least not quickly.

The current account surplus, which was supposed to decline sharply, has actually increased, as savings have remained higher and investment lower than expected.

Balance Sheet

Countries like Germany that are running a current account surplus would also help themselves by helping to stimulate the European economy as a whole.

It is running a current account surplus that is now larger than China s indeed, the largest in the world in absolute value.

France s current account deficit has risen to more than 2 of GDP, even as its economic growth has ground to a halt.

This time, China s current account surplus has been shrinking significantly, owing to the global recession caused by the collapse of the US financial bubble.

This is 8.5 times higher than the total US current account deficit of 3.9 trillion during the same period.

The really important target for any country starting an adjustment program with a double digit current account deficit must be export growth.

Countries that were overspending, under saving, and running current account deficits have been forced by markets to spend less and save more.

This extraordinary swing of almost 400 billion in the eurozone s current account balance did not result from a competitive devaluation the euro has remained strong.

When Congress pressed China for a large currency revaluation in 2004 2005, China s current account surplus was rising at an accelerating pace.

Growth momentum has fizzled and, with inflation persistently high, Indian producers are struggling to compete in world markets. The current account deficit is increasing relentlessly, owing to a widening trade deficit (now at 13 of GDP), raising the danger of a balance of payments crisis.