Capital Flows and the Current Account: Taking Financing (More) Seriously

50 Pages Posted: 22 Oct 2015

See all articles by Claudio E. V. Borio

Claudio E. V. Borio

Bank for International Settlements (BIS) - Research and Policy Analysis

Piti Disyatat

Bank for International Settlements (BIS)

Date Written: October 2015

Abstract

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

Borio, Claudio E.V. and Disyatat, Piti, Capital Flows and the Current Account: Taking Financing (More) Seriously (October 2015). BIS Working Paper No. 525, Available at SSRN: https://ssrn.com/abstract=2676714

Claudio E.V. Borio (Contact Author)

Bank for International Settlements (BIS) - Research and Policy Analysis ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

Piti Disyatat

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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