The Current Account (CA) 

• A positive value for the current account is called a current account surplus; a negative value is 

called a current account de?cit. The current account mainly consists of 4 types of transactions: 

1. Exports and imports of goods 

- Exports of goods are credits (+) to the current account 

- Imports of goods are debits (-) to the current account 

The di?erence between exports and imports of goods is called the merchandise trade 

balance. Since the 1970's, the U.S. has run a merchandise trade de?cit: in recent times 

the merchandise trade de?cit has reached all-time highs 

2. Exports and imports of services 

- Exports of services are credits to the current account (+) 

- Imports of services are debits to the current account (-). 

This category consists of items such as tuition paid to universities by international 

students, money spent on travel by tourists, banking, insurance, consulting services etc. 

Unlike the case of goods, the U.S. typically runs a surplus in the service account (exports 

of services exceed imports of services) although this is beginning to change rapidly with 

the advent of outsourcing. 

3. Interest payments on international investments. 

- Interest, dividends and other income received on U.S. assets held abroad are credits 

(+) 

- Interest, dividends and payments made on foreign assets held in the U.S. are debits 

(-). 

Since 1994, the U.S. has run a net debit in the investment income account: more  

payments are made to foreigners than foreigners make to U.S. investors. 

4. Unilateral transfers 

- Remittances by U.S. citizens working abroad, unilateral aid to the U.S. from other 

countries pensions paid by foreign countries to their citizens living in the U.S. count 

as credits (+). 

- Remittances by foreigners working in the U.S., unilateral aid from the U.S. to other 

countries, pensions paid to U.S. citizens living abroad count as debits (-). 

As expected the U.S. runs a de?cit in unilateral transfers. 

The sum of these components is known as the current account balance. A negative number 

is called a current account de?cit and a positive number called a current account surplus. As 

expected, given that it runs a surplus only in the services component of the current account, 

the U.S. runs a substantial current account de?cit. 

Intuitively, think of credits to the current account as transactions involving receipt of income 

to U.S. resident and debits to the current account as transactions involving payment of in- 

come to foreigners. The transactions can involve goods, services, investment income, pension 

income or other unilateral transfers.