Current Account Deficit

Countries run current account deficits when the aggregate value of goods, services and transfers exported is less than the aggregate value of goods, services and transfers imported. According to the twin-deficit hypothesis, trade deficits mean governments are running their economies in a reckless manner. However, as long as countries can finance deficits in external debt markets at reasonable cost, it can be a workable arrangement. Emerging market sovereigns have long used international debt markets to fund current account deficits.