Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate
AbstractThe large trade and current account deficits of the United States cannot continue indefinitely because doing so would constitute a permanent gift to the U.S. economy. The process that will cause this gift to shrink and that will eventually cause it to reverse is a fall in the dollar. The dollar will fall as private investors and governments become unwilling to accept the risk of increasing amounts of dollars in their portfolios, especially in a context in which they realize that the dollar must fall to reduce the trade imbalance. Although a more competitive dollar is the mechanism that will cause the U.S. trade deficit to decline, the fundamental requirement for a lower trade deficit is an increase in the U.S. national saving rate. So a rise will be driven by higher household savings of the coming years as the two primary forces that depressed savings in recent years are reversed: the exceptionally rapid rise in household wealth and the high level of mortgage refinancing with equity withdrawal.
Download InfoIf 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.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13952.
Date of creation: Apr 2008
Date of revision:
Note: IFM ITI
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Martin Feldstein, 2008. "Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 113-25, Summer.
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-21 (All new papers)
- NEP-CBA-2008-04-21 (Central Banking)
- NEP-INT-2008-04-21 (International Trade)
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.:
- John Taylor, 2007.
"Housing and Monetary Policy,"
07-003, Stanford Institute for Economic Policy Research.
- David Dollar & Shang-Jin Wei, 2007.
"Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China,"
IMF Working Papers
07/9, International Monetary Fund.
- David Dollar & Shang-Jin Wei, 2007. "Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China," NBER Working Papers 13103, National Bureau of Economic Research, Inc.
- Robert J. Shiller, 2007.
"Understanding Recent Trends in House Prices and Home Ownership,"
Cowles Foundation Discussion Papers
1630, Cowles Foundation for Research in Economics, Yale University, revised Oct 2007.
- Robert J. Shiller, 2007. "Understanding recent trends in house prices and homeownership," Proceedings, Federal Reserve Bank of Kansas City, pages 89-123.
- Shiller, Robert J., 2007. "Understanding Recent Trends in House Prices and Home Ownership," Working Papers 28, Yale University, Department of Economics.
- Robert J. Shiller, 2007. "Understanding Recent Trends in House Prices and Home Ownership," NBER Working Papers 13553, National Bureau of Economic Research, Inc.
- Martin Feldstein, 2005. "Monetary Policy in a Changing International Environment: The Role of Global Capital Flows," NBER Working Papers 11856, National Bureau of Economic Research, Inc.
- Martin Feldstein, 2006. "The 2006 Economic Report of the President: Comment on Chapter One (The Year in Review) and Chapter Six (The Capital Account Surplus)," NBER Working Papers 12168, National Bureau of Economic Research, Inc.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Far Too Low for Far Too Long
by JW Mason in Rortybomb on 2012-04-07 14:19:15
- Far Too Low for Far Too Long
by JW Mason in Rortybomb on 2012-04-06 04:31:17
- Hoffmann, Mathias & Krause, Michael U. & Laubach, Thomas, 2011.
"Long-run growth expectations and "global imbalances","
CFS Working Paper Series
2011/01, Center for Financial Studies (CFS).
- Hoffmann, Mathias & Krause, Michael & Laubach, Thomas, 2011. "Long-run growth expectations and 'global imbalances'," Discussion Paper Series 1: Economic Studies 2011,01, Deutsche Bundesbank, Research Centre.
- Smith, Constance, 2011.
"External Balance Adjustment: An Intra-National and International Comparison,"
2011-13, University of Alberta, Department of Economics.
- Smith, Constance E., 2011. "External balance adjustment: An intra-national and international comparison," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1195-1213, October.
- Gunther Schnabl & Stephan Freitag, 2012. "Determinants of Global and Intra-European Imbalances," Global Financial Markets Working Paper Series 25-2011, Friedrich-Schiller-University Jena.
- P. Butzen & W. Melyn & W. Vandevyvere, 2010. "Rebalancing global demand," Economic Review, National Bank of Belgium, issue II, pages 21-38, September.
- Franziska Ohnsorge & Ashoka Mody, 2010. "After the Crisis: Lower Consumption Growth but Narrower Global Imbalances?," IMF Working Papers 10/11, International Monetary Fund.
- Salotti, Simone, 2008. "Global imbalances and household savings: the role of wealth," MPRA Paper 17729, University Library of Munich, Germany, revised 2009.
- Chevallier, Julien, 2012. "Global imbalances, cross-market linkages, and the financial crisis: A multivariate Markov-switching analysis," Economic Modelling, Elsevier, vol. 29(3), pages 943-973.
- Pancaro, Cosimo, 2013. "Current account reversals in industrial countries: does the exchange rate regime matter?," Working Paper Series 1547, European Central Bank.
- Vincent C.S. Lim & Victor Pontines, 2012. "Global Imbalances: A Primer," Staff Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number sp86, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.