Extending the theory of generational accounts, I show that the conventional current account is not related to the real effects of a country's fiscal policy. For any international array of fiscal policies, a country can implement its own policy so that the conventional government and current account deficits are zero in every period. I argue that economists should develop a new measure of the current account. This measure is forward looking and keeps track of expected transfers between countries.



Publisher statement

Published by Blackwell Publishing. The definitive version is available at http://www.jstor.org/stable/2527360.

Included in

Economics Commons



URL: http://digitalcommons.calpoly.edu/econ_fac/44