The U.S. External Deficit and the Developing Countries
AbstractIn the absence of US fiscal adjustment and a further correction of the dollar, the current account deficit is headed to $1.3 trillion by 2010 (8 to 8.5 percent of GDP) and net US foreign liabilities to over $8 trillion (50 percent of GDP). According to CGD/IIE Senior Fellow William R. Cline, the rising trade deficit and associated borrowing from abroad are now financing a decline in personal saving and a rise in the government deficit. This imbalance will increasingly put the US economy—and the developing countries—at risk. This working paper focuses on the impact that the US external deficit and a possible “hard landing” for the US and world economies will have on developing countries. Cline finds that these countries are at risk since they have relied heavily on a continuing expansion of trade surpluses with the United States as a source of demand. Developing countries with high borrowing abroad are also doubly sensitive to a spike in world interest rates—once directly from higher US interest rates, and once indirectly through higher risk spreads—that might be associated with a hard landing. This Working Paper is based on The United States as a Debtor Nation, a book published in 2005 by the Center for Global Development and the Institute for International Economics.
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Bibliographic InfoPaper provided by Center for Global Development in its series Working Papers with number 86.
Length: 21 pages
Date of creation: Mar 2006
Date of revision:
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Web page: http://www.cgdev.org
trade deficit; personal savings; world economy; trade surplus;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E0 - Macroeconomics and Monetary Economics - - General
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-19 (All new papers)
- NEP-FMK-2006-08-19 (Financial Markets)
- NEP-IFN-2006-08-19 (International Finance)
- NEP-INT-2006-08-19 (International Trade)
- NEP-MAC-2006-08-19 (Macroeconomics)
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- Ziesemer, Thomas, 2007.
"Estimations of US debt dynamics: Growth cum debt and the savings glut in Kouri’s model,"
MERIT Working Papers
003, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Ziesemer, Thomas, 2007. "Estimations of US debt dynamics: Growth cum debt and the savings glut in Kouri’s model," MERIT Working Papers 003, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
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