Relationship Between Current Account Imbalance And Economic Structure

Before the2008financial crisis a significant feature of the global economy is the continuing expanding current account imbalance. Mainly is the continued expansion of the American current account deficit and Asian emerging market countries’ current account surplus. Current account deficit of developing countries like China and current account surplus in developed countries like America indicate that capital from developing countries long-term inflows to developed countries. This is inconsistent with the standards that developed countries should export capital to developing countries. For this paradox phenomenon caused the wide attention in academic circles, many scholars have conducted in-depth research. But when we examine the history of dynamic evolution of external imbalances, We find that a country’s current account change is closely related its internal economic structure change. If a country is on the stage of industrialization, manufacturing industry is well-developed, its current account tends to be surplus, no matter is the gold standard period of England and France, Germany and other countries, or50,60’s USA, Japan and Germany in80’,and since twenty-first century the emerging market countries. If a country is in the post-industrialization development stage or the virtualization economy development stage, its current account tends to be deficit, whether it is the age of80’s in the United States, or since the90’s the deepening of financial liberalization in the UK, and euro zone countries after the birth of the euro in1999.Therefore, we think that the reason of external imbalances is not external, but internal. According to the research, we found not only a direct relationship between the current account balance of payments and the domestic manufacturing industry as the core of the degree of industrialization, but also has close relationship with the proportion between virtual economy and real economy.This article attempts to analysis current account imbalance from the perspective of economic structure change, especially from the fictitious economy angle. What need points out is, the current account imbalance between not only reflect a country’s import and export, also reflects a country investment and savings gap. Therefore, this paper based on the theoretical model respectively from the import-export and investment-saving perspective, analysis the impact of the economic structure on current account. On the basis of theoretical analysis, we use cross-country panel data empirically testing the theoretical model. After the analysis of theory and experience, we conducted a case analysis, focus on USA and emerging market external imbalance, and explain external imbalance of the America and emerging market countries from the angle of economic structure. Through theoretical and empirical analysis, this paper draws the following conclusion:First, from the perspective of historical evolution, the changes of the global imbalance pattern is divided into six periods, after entering twenty-first Century a significant feature of the global imbalance is the continued large current account deficits in developed countries and the continued large current account surplus in emerging market countries. Second, no matter from the perspective of investment and savings, or from the perspective of net exports showed that the current account is determined by an internal economic structure, namely economic virtualization level of a country and a non-industrialized. The mutual influence between the current account and the economic structure, with the degree of economic virtualization and non industrial deepening, a country’s current account tends to be deficit; at the same time, continuous current account deficit will further deepen the economic virtualization degree and degree of non-industrialization of a country. Fourth, the relationship between economic virtualization and current account are not simple linear, but existing obvious threshold characteristic, when the economic virtualization continuously across the threshold value, the effect of economic virtualization to reduce current account balances is growing, the current account deficit is larger and larger, more and more requirements of net capital inflows, a country facing rising capital inflows sudden stop risks, the possibility of virtual economy "metastable" destroyed continuously improved. Fifth, external imbalances contain risks, In order to achieve a more balanced global economy, America and part of European current account deficit countries should promote the coordinated development of the real economy and the virtual economy, and to increase domestic savings, including the implementation of a sustainable fiscal policy. And China such current account surplus country should export capital, actively promote the internationalization of RMB, the positive development of the virtual economy, the financial system from indirect financing to direct financing and accelerate the transformation of the domestic financial market reform.