02322cas a2200313 a 4500 AALejournalIMF021523 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513570013 1018-5941 BD-DhAAL BD-DhAAL Jones, Callum. Credit Cycles, Fiscal Policy, and Global Imbalances / Callum Jones, Pau Rabanal. Washington, D.C. : International Monetary Fund, 2021. 1 online resource (53 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We study the role that changes in credit and fiscal positions play in explaining current account fluctuations. Empirically, the current account declines when credit increases, and when the fiscal balance declines. We use a two-country model with financial frictions and fiscal policy to study these facts. We estimate the model using annual data for the U.S. and 'a rest of the world' aggregate that includes main advanced economies. We find that about 30 percent of U.S. current account balance fluctuations are due to domestic credit shocks, while fiscal shocks explain about 14 percent. We evaluate simple macroprudential policy rules and show that they help reduce global imbalances. By taming the financial cycle, macroprudential rules that react to domestic credit conditions or to domestic house prices would have led to a smaller and less volatile U.S. current account deficit. We also show that a countercylical fiscal policy rule that stabilizes output growth reduces the level and volatility of the U.S. current account deficit. Mode of access: Internet Credit Cycles imf Current Account Balances imf Fiscal Policy imf Macroprudential Policies imf Model Evaluation and Selection imf Rabanal, Pau. IMF Working Papers; Working Paper ; No. 2021/043 Full text available on IMF http://elibrary.imf.org/view/journals/001/2021/043/001.2021.issue-043-en.xml IMF e-Library