Does the Current Account Still Matter?
Obstfeld makes a big point that the current account represents an intertemporal trade, where the deficit country obtains current tradeable goods in trade for future tradeable goods. Borrowing from the future in this way may be perfectly fine, but it may also be an “important indicator of potential macro and financial stresses”. The stress he has in mind comes from the fact that, at some future point, the deficit country is going to have to come up with the promised tradeable goods, which means running a current account surplus.
About the Author
Perry Mehrling
Professor of Economics, Barnard College
Perry G. Mehrling, Professor of Economics, joined the faculty of Barnard in 1987. He has held visiting positions at the Sloan School of Management at MIT and at Boston University. At Barnard, Professor Mehrling teaches courses on the economics of money and banking, the history of finance, and the financial dimensions of the U.S. retirement, ...
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