Andreas Fischer, Henrike Leonie Groeger, Philip Sauré, Pınar Yeşin, 09 December 2019

Global imbalances are at the core of today’s trade tensions, but official current account statistics may not be sufficient to assess the external positions of financially integrated economies. For instance, balance of payments accounting standards do not prescribe the recording of retained earnings on portfolio equity investment in the current account. This column argues that adjustments in income flows in equity investment therefore remain concealed in official current account statistics. In today’s financially integrated world with existing accounting standards, external adjustment mechanisms should be considered more broadly than just as an evolution of trade balance and exchange rate movements. 

Rebecca Hellerstein, Cédric Tille, 21 August 2008

Financial globalisation has made current account balances more sensitive to volatile variables like asset prices and interest rates. This column says that greater current account volatility may be good news if it comes in the form of countercyclical risk sharing.

CEPR Policy Research