Issue Details

ANALYZING THE IMPACT OF CURRENT ACCOUNT DEFICITS ON ECONOMIC STABILITY

ABSTRACT

A current account deficit, signifying an imbalance between a nation’s imports and exports, has emerged as a critical issue in the realm of economic stability. This abstract explores the multifaceted impact of current account deficits on a nation’s economic stability. On one hand, such deficits can be indicative of robust domestic demand and investment, fostering economic growth. Conversely, they can also lead to vulnerabilities, particularly when reliant on foreign financing, potentially exposing a nation to sudden capital outflows and currency depreciation. The extent to which current account deficits affect economic stability depends on various factors, including the sustainability of the deficit, external shocks, and a nation’s ability to service its international debt obligations. This abstract aims to shed light on the intricate relationship between current account deficits and economic stability, emphasizing the importance of prudent policies, such as maintaining a balanced trade position and building adequate foreign exchange reserves, to mitigate the potential risks associated with sustained deficits.

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