02415cas a2200313 a 4500 AALejournalIMF022933 230101c9999 xx r poo 0 0eng d 20.00 USD 9798400207488 1018-5941 BD-DhAAL BD-DhAAL Behar, Alberto. The Current Account Income Balance : External Adjustment Channel or Vulnerability Amplifier? / Alberto Behar, Ramin Hassan. Washington, D.C. : International Monetary Fund, 2022. 1 online resource (46 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 In terms of size, the net income balance (IB) is comparable to the trade balance (TB) for many countries. Yet the role of the IB in mitigating external vulnerabilities or complicating external adjustment remains underexplored. This paper studies the role of the IB in stabilizing or destabilizing the current account over the cycle and in crises. Our results show that, due to a negative correlation with the TB, the IB significantly dampens the time series volatility of the current account for most countries. However, the IB generally does not improve during crisis episodes, so current account adjustment occurs entirely through improvements in the TB. The paper also estimates IB semi-elasticities with respect to the exchange rate (ER). Semi-elasticities are small for most countries, so the IB is generally not a significant channel through which the ER stabilizes the current account, and trade-based semi-elasticities are, with some important exceptions, good proxies for current account semi-elasticities used in external sector assessments. Mode of access: Internet Empirical Studies of Trade imf International Investment imf Multiple or Simultaneous Equation Models imf Panel Data Models imf Spatio-Temporal Models imf Hassan, Ramin.. IMF Working Papers; Working Paper ; No. 2022/106 Full text available on IMF https://elibrary.imf.org/openurl?genre=journal&issn=1018-5941&volume=2022&issue=106 IMF e-Library