Globalisation, current accounts and the dollar

- By FX Markets Staff
- @FXMarkets_
- 09 Jan 2006

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From zero...

Think of a world with zero capital mobility. In such a world, real interest rates would have to adjust until the gap between savings and investment – ie, the current account balance – equalled zero in each country. The (real) exchange rate in such a world would have to perform the task of ensuring that the current account was always in balance. If the current account was in surplus, the domestic currency would have to appreciate and vice versa. In a world of zero capital mobility

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