Meaningful Measures of the Current Account

Eric O'N. Fisher, The Ohio State University
YoungSoo Woo, Korea Institute for International Economic Policy Trade and Investment Studies

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Copyright © 1997 Blackwell Publishing. The definitive version is available at http://dx.doi.org/10.1111/1467-9396.00069.

NOTE: At the time of publication, the author Eric Fisher was not yet affiliated with Cal Poly.

Abstract

Since the conventional current account uses cash-flow accounting, it is potentially devoid of economic meaning. Assessing foreign assets at market values and including expected transfers from abroad, this paper reports two measures of the external surplus that are grounded in economic theory. The first measure is the aggregate generational current account, annual differences in the sum of net foreign assets across all current and future generations. The second measure is the generational profile of net foreign assets in a benchmark year. These ideas are implemented with data from Korea.