Can market forces incrementally defuse a buildup in a nation’s current account deficit and net external debt before a crisis more abruptly does so? The answer seems to lie with the degree of market flexibility.
Across the leading industrial economies, the best we can say at present is that while the contraction in overall output in the March quarter was broadly similar to that in the December quarter, recent data suggest that the rate of contraction in the June quarter will be significantly smaller.