Recessions and external imbalances

This paper empirically examines the relationship between growth (and recessions) and current account imbalances at global country level. The results suggest that are strongly pro-cyclical, strong positive correlation is not driven exclusively by major slowdowns. We also find past recessions financial crises, both country-specific ones, tend to be preceded a building up in followed sharp persistent adjustment. pattern marked contrast with increase observed during COVID-19 crisis.