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Critically examine the view that a deficit on the current account of the balance of payments is of no economic significance.

Critically examine the view that a deficit on the current account of the balance of payments is of no economic significance.

Answers

marlyne
The importance of a current account equilibrium in government macroeconomic policy has fallen in recent decades. This is partly the result of the movement of most developed countries to a floating exchange rate regime and also to the increasing importance of financial and capital flows. Governments feel that they can turn a blind eye to a current account deficit as it is likely to be balanced by a financial account surplus. In addition, a deficit may be corrected by a fall in the value of the pound without the government having to take any other corrective measures. However, a persistent and significant deficit cannot be ignored for ever and corrective measures will eventually have to be taken.
marlinbito answered the question on July 8, 2018 at 18:29

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