The Current Account and Macroeconomic Adjustment in the 1970s

DURING THE PAST DECADE, the behavior of international capital flows, current account balances, and exchange rates have puzzled economists and preoccupied policymakers. The period has been marked by widely fluctuating exchange rates, huge OPEC surpluses, burgeoning debt of less developed countries (LDCs) and unprecedented current account deficits in many developed countries. The nature, direction, and scope of international borrowing have also shifted dramatically. The proportion of private to official capital inflows to LDCs has grown substantially; the international money market has expanded dramatically; and capital controls have been liberalized in many economies.