Publication

Over the last twenty five years, current account imbalances have been both rising over the trend and have become more volatile over the cycle. In boom times, imbalances expanded while in times of a cyclical downturn they shrank. A rising trend has been mainly explained with two developments: first, the increasing capacity and willingness of international financial markets to relax domestic savings constraints in financing domestic investment and consumption, and second constraints in domestic financial markets of some countries to efficiently absorb high domestic savings.