How much depreciation of the US dollar for sustainability of the current accounts?
AbstractIn this paper, we conduct a simulation analysis to investigate how much depreciation of the US dollar is needed to reduce the current account deficits in the near future. We use some VAR models to estimate relationships between the exchange rate of the US dollar and the current accounts in the United States. We conclude that some scenarios of the US dollar depreciation would reduce the current account deficits to a level under 2% of GDP in the next several years. The results are regarded as robust for each of the scenarios thought they depend on our supposed VAR models.
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Bibliographic InfoPaper provided by Institute of Economic Research, Hitotsubashi University in its series Hi-Stat Discussion Paper Series with number d04-44.
Date of creation: Nov 2004
Date of revision:
US dollar depreciation; Current account sustainability; Investment-saving balance; International trade flows; Vector Autoregression (VAR);
Find related papers by JEL classification:
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-12-12 (All new papers)
- NEP-CMP-2004-12-12 (Computational Economics)
- NEP-IFN-2004-12-12 (International Finance)
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- Eiji Ogawa & Takeshi Kudo, 2007. "Possible depreciation of the US dollar for unsustainable current account deficit in the United States," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 8(4), pages 24-30, 01.
- Ogawa, Eiji & Kudo, Takeshi, 2007. "Asymmetric responses of East Asian currencies to the US dollar depreciation for reducing the US current account deficits," Journal of Asian Economics, Elsevier, vol. 18(1), pages 175-194, February.
- Takeuchi, Fumihide, 2010. "US external debt sustainability revisited: Bayesian analysis of extended Markov switching unit root test," Japan and the World Economy, Elsevier, vol. 22(2), pages 98-106, March.
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