House Prices And The Current Account Deficit

Moneybox
A blog about business and economics.
Dec. 11 2011 12:48 PM

House Prices And The Current Account Deficit

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We looked yesterday at the impact of fiscal policy on current account deficits and found a small but modest relationship. Last week Kash Mansouri took a look at the relationship between housing prices and the current account deficit, finding the above for the United States. Again, a relationship. And from the vantage point of 2005 you might have thought it was an extremely strong relationship but more recently it looks hazy. In an international context you can find a strong correlation, but you need to ignore China to make it show up.

A return to old-school curbs on capital inflows keeps being the dog that doesn't park in the developed world policy debate.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.