Question

Why does the trade balance and the current account balance track so closely together over time?

Short answer

Trade balance is a part of current account balance.

Step-by-step solution

Step1. Introduction

Imports refer to the buying of goods/services from the foreign countries.

Exports refer to the selling of goods/services to the foreign countries.

International flow of money primarily refers to the flow of global investments.

Step2. Explanation

Trade difference is the difference of exports (X) and imports (M). It may be surplus(X>M) or deficit(M>X).

The current account balance takes into account this number and also accounts the international flows via investments as explained in the previous step.

Hence, since trade difference is accounted for in the current account balance, they are quite related and hence track so closely together over time.