EWS = “Early Warning System”. Jamel Saadaoui has an interesting blogpost, investigating whether the median current account to GDP balance — namely when it becomes very negative, -2% to -4% — presages a global recession as defined by Kose et al. (2020).
Source: Saadaoui (2025).
As Saadaoui notes, there’s not a perfect record — there’s a false positive in 2022Q3 (well, Kose et al. is 2020, so didn’t assess this episode), and seems roughly contemporaneous rather than leading in the 1974 and 1990-91 recessions.
Nonetheless, even if not constituting a necessarily a highly reliable early warning system, this is an interesting stylized fact. Why should the median CAB be associated with a global recession? I conjecture large median deficits would mean lots of countries are running deficits, with a few offsetting surpluses. This in turn means that economies in general are running hot just before adjustment takes place. Just a surmise on my part.
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