On the interpretation and international comparison of external imbalances

The paper questions the relevance of the current account/GDP ratio as a macroeconomic indicator. It argues that a reliance on CA/GDP may distort international comparisons as the CA deficit might be a misleading numerator and the GDP may be a biased denominator for assessing external imbalances in such comparisons. Rather than suggesting a single alternative indicator, the paper recommends that a larger set of indicators should be applied in assessing external imbalances in a comparative perspective.