Advanced Search
MyIDEAS: Login to save this paper or follow this series

A quantitative analysis of the mechanisms for adjustment of the external deficit of the United States

Contents:

Author Info

  • Francesco Paterno'

    ()
    (Banca dÂ’Italia, Economic Research Department)

Registered author(s):

    Abstract

    This work attempts to quantify the size of the adjustment of the United States external imbalance which can arise from a depreciation of the dollar, an adjustment of the GovernmentÂ’s budget in the United States and an acceleration of the technological process in other main advanced economies. The quantitative assessment of the three different mechanisms (each one of them separately considered) is carried out making use of the econometric model of the world economy NiGEM, elaborated by the National Institute of Economic Social Research. The results of the simulations investigating the effects of a depreciation of the US dollar highlight the limited adjustment of the United States external imbalance when associated with this mechanism. The limited size of the adjustment is partly the result of interest rates equal nearly to zero in Japan which restricts the margins of reaction of the Japanese monetary policy to an appreciation of the yen. Simulations studying the hypothesis of an improvement of the Government budget in the United States demonstrate how the adjustment of the external imbalance equals, in the medium run, just one third of the GovernmentÂ’s budget adjustment. The simulations analysing the hypothesis of acceleration of the technological progress in the main advanced economies, other than the United States, show that correction of the United States external imbalance would be limited in the short run but would tend to widen out in the longer term. In the scenario of depreciation of the dollar and in that of acceleration of the technological progress the improvement of the net international investment position of the United States largely exceeds the improvement of the external deficit because of the significant effects of revaluation of the stocks of foreign assets held by the United States.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. 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.
    File URL: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td05/td567_05/td567/tema_567.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 567.

    as in new window
    Length:
    Date of creation: Nov 2005
    Date of revision:
    Handle: RePEc:bdi:wptemi:td_567_05

    Contact details of provider:
    Postal: Via Nazionale, 91 - 00184 Roma
    Web page: http://www.bancaditalia.it
    More information through EDIRC

    Related research

    Keywords: disavanzo esterno; posizione netta sullÂ’estero;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bdi:wptemi:td_567_05. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.