Sure, a large LONG-TERM current account surplus can cause problems.
But first, the definition of "current account" has different meanings to different economists. For my purposes, I assume a simple situation wher "current account" is simply "balance of trade"; a surplus means a country is exporting more than importing.
One must ask why there is an account surplus. It is likely because of some government intervention. In which case you have an economy based on Mercantilism. (An economic belief common in 17th and 18th century europe.) Google Mercantilism for the multitude of problems with a system demanding high-exports and low-imports
Use this as a start.
Lotsa luck
is a large current account surplus ever a negative situation for a country?
3 answers
For me, or shall I say my book the CA= EX-IM, which you also wrote balance of trade.
I know that perfect economy is when the supply equals demand. But I can't see why a surplus for a country is bad!!
More money means that the country can save more and therefore invest more as it desire, plus it will lead to a strong currency...
But then again if one country has a large surplus another country must have a large deficit...
OK I will look read about Mercantilism:)
I know that perfect economy is when the supply equals demand. But I can't see why a surplus for a country is bad!!
More money means that the country can save more and therefore invest more as it desire, plus it will lead to a strong currency...
But then again if one country has a large surplus another country must have a large deficit...
OK I will look read about Mercantilism:)
Suppose that you had $100. ABC bank is offering 5 percent simple interest. DEF Bank is offering 10 percent simple interest. Which bank would you deposit your money into if you wanted to earn more interest?