Capital Flows and the Current Account: Taking Financing (More) Seriously
50 Pages Posted: 22 Oct 2015
Date Written: October 2015
This paper questions the appropriateness of popular analytical frameworks that focus on current accounts or net capital flows as a basis for assessing the pattern of cross-border capital flows, the degree of financial integration and the vulnerability of countries to financial crises. In the process, it revisits the Lucas paradox, the Feldstein-Horioka puzzle and the notion of sudden stops. It argues that, in a world of huge and free capital flows, the centrality of current accounts in international finance, and hence in academic and policy debates, should be reconsidered.
Keywords: capital flows, current account, global imbalances, financial integration, credit, finance, money
JEL Classification: E10, E40, E44, E47, E52, E60
Suggested Citation: Suggested Citation