Title: Current account adjustment in industrialized countries
Description: "This paper examines the dynamics of current account adjustment among industrialized countries.  We identify twenty-five episodes in which a large sustained improvement in the current account occurred between 1980 and 1997.  We find that a typical current account reversal begins when the current account deficit is about 5 percent of GDP, that it is associated with slowing income growth and a 10-20 percent real exchange rate depreciation.  Real export growth, declining investment, and an eventual leveling off in both the net international investment position and the budget deficit-GDP ratio are also likely to be part of the adjustment.  These results suggest that current account reversals in industrialized countries are largely a function of the business cycle"--Federal Reserve Board web site.
Subjects: Balance of trade, Econometric models