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

Can Global Imbalances Continue?: Policies for the U.S. Economy

Contents:

Author Info

  • Dimitri B. Papadimitriou
  • Gennaro Zezza
  • Greg Hannsgen

Abstract

In this new Strategic Analysis, we review what we believe is the most important economic policy issue facing policymakers in the United States and abroad: the prospect of a growth recession in the United States, linked to the imbalances in the U.S. current account, government, and private sector deficits. The current account balance, which is a negative addition to U.S. aggregate demand, is now likely to be above 6.5 percent of GDP and has been rising steadily for some time. The government balance has improved, again giving no stimulus to demand, which has therefore relied entirely on a large and growing private sector deficit. A rapidly cooling housing market is one of the signs showing that this growth path is likely to break down. We focus first on the current account deficit. Our analysis suggests that a necessary and sufficient condition to address this problem, without dire consequences for unemployment and growth, is that net export demand grow by a sufficient amount. For this to happen, three conditions need to be satisfied: foreign saving has to fall, especially in Europe and East Asia; U.S. saving has to rise; and some mechanism, such as a change in relative prices, should be put in place to help the previous two phenomena translate into an improvement in the U.S. balance of trade.

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.levyinstitute.org/pubs/sa_nov_06.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Strategic Analysis Archive with number sa_nov_06.

as in new window
Length:
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:lev:levysa:sa_nov_06

Contact details of provider:
Web page: http://www.levyinstitute.org

Related research

Keywords:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Richard H. Clarida & Manuela Goretti & Mark P. Taylor, 2007. "Are There Thresholds of Current Account Adjustment in the G7?," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 169-204 National Bureau of Economic Research, Inc.
  2. Caballero, Ricardo J. & Farhi, Emmanuel & Gourinchas, Pierre-Olivier, 2008. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," Scholarly Articles 3229094, Harvard University Department of Economics.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Samuel Kortum & Jonathan Eaton & Robert Dekle, 2007. "Unbalanced Trade," 2007 Meeting Papers 921, Society for Economic Dynamics.
  2. Dimitri B. Papadimitriou & Greg Hannsgen & Gennaro Zezza, 2007. "Cracks in the Foundations of Growth: What Will the Housing Debacle Mean for the U.S. Economy?," Economics Public Policy Brief Archive ppb_90, Levy Economics Institute.
  3. Jorg Bibow, 2006. "Global Imbalances, Bretton Woods II, and Euroland's Role in All This," Economics Working Paper Archive wp_486, Levy Economics Institute.
  4. Dimitri B. Papadimitriou & L. Randall Wray, 2007. "The April AMT Shock: Tax Reform Advice for the New Majority," Economics Policy Note Archive 07-1, Levy Economics Institute.
  5. Eugenio Caverzasi & Antoine Godin, 2013. "Stock-flow Consistent Modeling through the Ages," Economics Working Paper Archive wp_745, Levy Economics Institute.
  6. Dimitri B. Papadimitriou & Greg Hannsgen & Gennaro Zezza, 2007. "The Effects of a Declining Housing Market on the U.S. Economy," Economics Working Paper Archive wp_506, Levy Economics Institute.

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:lev:levysa:sa_nov_06. 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: (Marie-Celeste Edwards).

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.