A NEW WAY OF THINKING ABOUT THE CURRENT ACCOUNT

Extending the theory of generational accounts, I show that the convent ional current account is not related to the real effects of a country' s fiscal policy. For any international array of fiscal policies, a cou ntry can implement its own policy so that the conventional government and current account deficits are zero in every period. I argue that ec onomists should develop a new measure of the current account. This mea sure is forward looking and keeps track of expected transfers between countries.