Certain growth-promoting policies can have negative side-effects by increasing the vulnerability of economies to financial crises. Typical examples are greater openness to financial flows or more liberalised financial markets. This paper investigates whether the growth benefits of policy reforms...

Turkey’s current account deficit widened to almost 10% of GDP in 2011 and has been narrowing only gradually since. An important question is to what extent Turkey’s current account deficit is excessive. To explore this issue, one needs to establish benchmarks. In this paper current account...

Effective macroeconomic and structural policies helped Turkey bounce back quickly and strongly from the global crisis, with annual growth averaging close to 9% over 2010-11. However, the current account deficit widened to around 10% of GDP in 2011 and consumer price inflation rose to over 10%....

Turkey recovered swiftly from the global financial crisis but sizeable macroeconomic imbalances arose in the process. High consumer price inflation and a wide current account deficit are sources of vulnerability. Even though below-potential growth helps rebalancing and disinflation, these...

Following Chairman Ben Bernanke’s comments before Congress that the FOMC may ‘take a step down in the pace of asset purchases if economic improvement appears to be sustained’, US 10-year interest rates picked up sharply and gross capital flows to emerging market economies (EMEs) reversed....

Recent episodes of large exchange rate movements, such as for Japan or the United Kingdom, have typically not been associated with large changes in trade balances and despite the polarisation of international investment positions large currency fluctuations during the global crisis of 2008-09...

After peaking in the first half of 2008, international imbalances declined sharply during the global crisis of 2008-09, in part reflecting cyclical factors such as large contractions in domestic demand on the back of bursting housing bubbles in a number of deficit countries, as well as large...

A simple econometric framework is presented linking current account balances of euro area countries to intra and extra euro area competitiveness, cyclical positions, fiscal positions and the oil price. The framework is then used to cyclically-adjust observed current account balances and...

Low growth and huge current account deficits have characterised the Portuguese economy over the past decade. Easy credit in global markets, combined with the absence of incentives to limit loan-to-deposit ratios until recently, made it possible to finance internationally high levels of...