Bill Craighead, assistant professor of economics, is the co-author of “Current Account Reversals and Structural Change in Developing and Industrialized Countries,” published in the February issue of The Journal of International Trade and Economic Development.
The paper compares the experience of high-income and developing countries in adjusting current account deficits, which measure how much they are relying on external borrowing. In both types of country, construction is the most sensitive sector to the current account. On average, adjustments in developing countries are more severe, but that is mainly due to the effects of currency crises. When you take those out, they look more similar. Employment effects in developing countries are less relative to the changes in output, which may reflect differing labor market institutions.
Craighead credits Lisa Lee ’13 for providing her “outstanding research assistance” while writing the paper. Lee worked on the research in 2011 while participating in the Quantitative Analysis Center’s summer program.