Is the U.S. Current Account Deficit Sustainable? If Not, How Costly Is Adjustment Likely to Be?

This file is part of IDEAS, which uses RePEc data

Is the U.S. Current Account Deficit Sustainable? If Not, How Costly Is Adjustment Likely to Be?

Author Info

Sebastian Edwards (University of California, Los Angeles)

Abstract

This paper analyzes the relationship between the U.S. dollar and the U.S. current account, dealing with issues of sustainability and the mechanics of current account adjustment. The analysis differs from other work in several respects. First, it emphasizes the dynamics of current account adjustment, going beyond computations of the real depreciation required to achieve sustainability. The analysis shows that, even if foreigners’ net demand for U.S. assets continues to increase significantly, the current account deficit is likely to fall steeply in the not too distant future. Second, the paper uses international evidence to explore the likelihood of an abrupt decline in capital flows into the United States. Third, it analyzes the international evidence on current account reversals, to investigate the potential consequences of a sudden stop of capital inflows. This analysis suggests that adjustment of the U.S. external accounts is likely to result in a significant reduction in growth.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

Publisher Info
Article provided by Economic Studies Program, The Brookings Institution in its journal Brookings Papers on Economic Activity.

Volume (Year): 36 (2005)
Issue (Month): 2005-1 ()
Pages: 211-288
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bin:bpeajo:v:36:y:2005:i:2005-1:p:211-288

Contact details of provider:
Postal: 1775 Massachusetts Ave NW, Washington DC 20036
Phone: (202) 797-6000
Fax: (202) 797-6004
Email:
Web page: http://www.brookings.edu/economics.aspx
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Lindsey Wilson).

Find related papers by JEL classification:
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

José De Gregorio, 2005. "Global Imbalances and Exchange Rate Adjustment," Economic Policy Papers Central Bank of Chile 15, Central Bank of Chile. [Downloadable!]

Statistics

Access and download statistics

Did you know? Apart from a small start up grant in the 1990's, RePEc has received no funding and lives on the help of volunteers.

This page was last updated on 2009-12-4.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.