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Does a Current-Account Deficit Indicate Bad Economic Policy?

In: Debates in Monetary Macroeconomics

Author

Listed:
  • William Scarth

    (McMaster University)

Abstract

Policymakers should not always seek a current-account surplus because there are always several policy objectives. Whether a surplus is desirable depends on what is most important. In the long run, current-account variations can smooth domestic living standards. But whether a surplus is appropriate depends on which individuals we think are more ‘deserving’. The more we value future generations compared to current generations, and the less we care about income inequality, the more economic analysis supports a current-account surplus. It is not for analysts, however, to decide which groups in society should be valued more. Further, we cannot always focus on the long run. Full employment is not always easily achieved; short-run stabilization must also be considered.

Suggested Citation

  • William Scarth, 2022. "Does a Current-Account Deficit Indicate Bad Economic Policy?," Springer Books, in: Steven Pressman & John Smithin (ed.), Debates in Monetary Macroeconomics, chapter 0, pages 173-191, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-11240-9_9
    DOI: 10.1007/978-3-031-11240-9_9
    as

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