Journal Article

Asset price booms and current account deficits

Abstract: Before the global financial crisis of 2007?2009, the United States and several other countries posted large current account deficits. Many of these countries also experienced asset price booms. Evidence suggests the two developments were linked. Rising asset values in the United States permitted households to borrow more easily to boost consumption, while the net sale of debt securities abroad financed current account deficits. The fall in some asset prices since the crisis can make it easier to reduce current account imbalances.

Keywords: Balance of payments; Asset pricing;

Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: FRBSF Economic Letter

Publication Date: 2011

Order Number: 37