DP1509 Current Account Sustainability: Selected East Asian and Latin American Experiences

Author(s): Gian Maria Milesi-Ferretti, Assaf Razin
Publication Date: November 1996
Keyword(s): Current Account, Exports, Real Exchange Rate, Savings, Sustainability
JEL(s): F32, F34
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1509

A number of developing countries have run large and persistent current account deficits in both the late-1970s/early-1980s and in the early-1990s, raising the issue of whether these persistent imbalances are sustainable. This paper puts forward a notion of current account sustainability and compares the experience of three Latin American countries ? Chile, Colombia and Mexico ? and three East Asian countries ? Korea, Malaysia and Thailand. It identifies a number of potential sustainability indicators and discusses their usefulness in predicting external crises.