Current Account Imbalances in ASEAN Countries : Are They a Problem?

Applying a consumption-smoothing model to five ASEAN countries reveals that excessive private consumption has not tended to characterize widening external imbalances in recent years, except to a small degree in Indonesia and Malaysia. Beyond consumption-smoothing, however, a number of factors influence the desirability of running large external deficits, including the level and composition of external liabilities, the flexibility of macroeconomic policies, and the health of banking systems