Current Account Reversals: Always a Problem?

58 Pages Posted: 17 Oct 2012 Last revised: 17 Apr 2022

See all articles by Barry Eichengreen

Barry Eichengreen

University of California, Berkeley; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Muge Adalet

Victoria University of Wellington - Te Herenga Waka - School of Economics & Finance

Date Written: September 2005

Abstract

Using panel data and case studies, we analyze the pre-1970 history of international capital flows and current account reversals. Considering a sample of emerging markets and advanced economies with per capita GDPs at least 60 per cent those of the lead country, we show that the incidence of reversals has been unusually great in recent years. The only prior period that matched the last three decades in terms of the frequency and magnitude of reversals was the 1920s and 1930s, decades notorious for the instability of capital flows. In contrast, reversals were both less common and smaller in the Bretton Woods and pre-World War I gold standard eras.

Suggested Citation

Eichengreen, Barry and Adalet, Muge, Current Account Reversals: Always a Problem? (September 2005). NBER Working Paper No. w11634, Available at SSRN: https://ssrn.com/abstract=2162337

Barry Eichengreen (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Muge Adalet

Victoria University of Wellington - Te Herenga Waka - School of Economics & Finance ( email )

P.O. Box 600
Wellington 6001
New Zealand

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