Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/289864 
Year of Publication: 
2024
Series/Report no.: 
Working Paper No. 256
Publisher: 
Oesterreichische Nationalbank (OeNB), Vienna
Abstract: 
This paper documents that cross-border investment income flows are important for explaining current account balances in major economies. Those investment incomes reflect returns on cross-border asset holdings and on balance often reach magnitudes around 5% of major economies' gross domestic product. I show that several correlates of this investment income balance differ from other current account components, including the trade balance. Both components essentially exhibit a zero correlation with each other, with considerable crosscountry heterogeneity. Moreover, I show that investment incomes are more persistent than other current account components, suggesting that more time is needed for current account imbalances to adjust. The main findings of the paper call for a more differentiated perspective on the current account in academic analysis and policy. The paper finally discusses implications for macroeconomic monitoring and surveillance, needed improvements in macro-financial data, and highlights scope for further research.
Subjects: 
Global imbalances
current account
international investment position
balance of payments
JEL: 
F3
F21
F45
Document Type: 
Working Paper

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