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   Investment Thoughts - Macro Observations

Asset Price Booms and Current Account Deficits

Before the global financial crisis of 20072009, 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.

Full Paper Link

FRBSF Economic Letter, December 5, 2011-Paul Bergin

18.12.2011


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