This paper studies the association between current account and real estate valuation across
countries. We find a robust and strong positive association between current account deficits
and the appreciation of the real estate prices/(GDP deflator). Controlling for lagged
GDP/capita growth, inflation, financial depth, institution, urban population growth and the
real interest rate; a one standard deviation increase of the lagged current account deficits is
associated with an appreciation of the real estate prices by 10%. This real appreciation is …