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.



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

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