Recessions and external imbalances

  1. Estefanía-Flores, Julia 1
  2. Furceri, Davide 1
  3. González-Domínguez, Pablo 1
  4. Jiménez, Daniel
  1. 1 International Monetary Fund
Journal:
Cuadernos económicos de ICE

ISSN: 0210-2633

Year of publication: 2022

Issue Title: Desequilibrios exteriores y crisis de deuda soberana

Issue: 103

Pages: 205-235

Type: Article

DOI: 10.32796/CICE.2022.103.7469 DIALNET GOOGLE SCHOLAR lock_openOpen access editor

More publications in: Cuadernos económicos de ICE

Abstract

This paper empirically examines the relationship between growth (and recessions) and current account imbalances at the global and country level. The results suggest that global current account imbalances are strongly pro-cyclical, and that the strong positive correlation between global growth and imbalances is not driven exclusively by major growth slowdowns. We also find that past recessions and financial crises, both country-specific and global ones, tend to be preceded by a building up in current account imbalances and followed by a sharp and persistent adjustment. This pattern is in marked contrast with the increase in global imbalances observed during the COVID-19 crisis.

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