Why does the world current account balance not equal to zero?
A. In principle, since one country’s export is another country’s import, current account balances across the world should sum to zero. In practice, however, this is not the case. While a discrepancy is difficult to analyze by its very nature, there is broad agreement that the global current account discrepancy likely reflects in part the following economic factors: • transportation lags, if exports are recorded in one year, while the corresponding imports are not recorded until the next; • underreporting of investment income, partly related to tax evasion and the growth of offshore centers; • asymmetric valuation, where the export and import of the same good are valued at different prices; and • data quality issues, especially for transportation services and workers’ remittances.
