Current account deficit, foreign borrowing, and monetary policy: the Italian experience
Keywords:Italy, balance of payments, readjustment, foreign exchange risk, monetary policy
The work reviews the stormy evolution of current accounts in the Italian balance of payments and the ways and timing by which equilibrium has been, or is in the course of being, restored. An international comparison finds that Italy is not alone in its effort to finance a process of readjustment, however, it is more seriously exposed because of the relative size of the debt and concentration of the foreign exchange risk. Thus far, adjustment has been pursued thanks to the combined operation of the depreciation of the currency on the exchange market and the restriction of demand.
JEL: F32, E52