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http://hdl.handle.net/10419/64109
  
Title:Globalization and the sustainability of large current account imbalances: Size matters PDF Logo
Authors:Aizenman, Joshua
Sun, Yi
Issue Date:2007
Series/Report no.:Working Papers, Santa Cruz Center for International Economics 07-18
Abstract:This paper evaluates the sustainability of large current account imbalances in the era when the Chinese GDP growth rate and current account/GDP exceed 10%. We investigate the size distribution and the durability of current account deficits during 1966-2005, and report the results of a simulation that relies on the adding-up property of global current account balances. Excluding the US, we find that size does matter: the length of current account deficit spells is negatively related to the relative size of the countries' GDP. We conclude that the continuation of the fast growth rate of China, while maintaining its large current account/GPD surpluses, would be constrained by the limited sustainability of the larger current account deficits/GDP of courtiers that grow at a much slower rate. Consequently, short of the emergence of a new demander of last resort, the Chinese growth path would be challenged by its own success.
Subjects:current account imbalances
growth
size
adding-up property
JEL:F15
F21
F32
F43
Document Type:Working Paper
Appears in Collections:Working Papers, Santa Cruz Institute for International Economics, UC Santa Cruz

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