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A New Way of Thinking about the Current Account

Eric O'N. Fisher
International Economic Review
Vol. 36, No. 3 (Aug., 1995), pp. 555-568
DOI: 10.2307/2527360
Stable URL: http://www.jstor.org/stable/2527360
Page Count: 14
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A New Way of Thinking about the Current Account
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Abstract

Extending the theory of generational accounts, I show that the conventional current account is not related to the real effects of a country's fiscal policy. For any international array of fiscal policies, a country can implement its own policy so that the conventional government and current account deficits are zero in every period. I argue that economists should develop a new measure of the current account. This measure is forward looking and keeps track of expected transfers between countries.

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