Bill Craighead, assistant professor of economics, is the co-author of a paper titled, “As the Current Account Turns: Disaggregating the Effects of Current Account Reversals in Industrial Countries,” published in the December issue of The World Economy. An abstract is available online here.
In the paper, Craighead examines “current account reversals” which occur when a country significantly reduces its international borrowing and its trade deficit.
“While there has been quite a bit of study of these episodes in economics, most of it has looked at the impact on the overall economy. What we did was look at how these episodes influence different parts of the economy and, therefore, how the composition of output and employment changes. We found that the most sensitive parts of the economy tend to be investment-related (e.g., construction), while, on the other hand, sectors related to natural resources tend to do relatively well,” he explained.