Origins of Sharp Reductions in Current Account deficits: An Empirical Analysis.

This brief report of ongoing research on determinants of current account reversals and their economic consequences provides evidence which is consistent with the literature on current account sustainability. A natural extension of this work, that we are currently pursuing, is an examination of the link between currency crises and reversals in current account imbalances. We believe that this type of analysis can shed additional light on the determinants of output costs associated with external crises.