IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

The US Dollar and the Trade Deficit: What Accounts for the Late 1990s?

  • Benjamin Hunt
  • Alessandro Rebucci

Based on a version of the IMF's global economy model set up to analyse macroeconomic interdependence between the United States and the rest of the world, this paper asks to what extent accelerating productivity growth in the United States may have contributed to the US real exchange rate appreciation and the trade balance deterioration witnessed in the second half of the 1990s. The paper concludes that productivity is only part of this story. A portfolio preference shift in favour of US assets, possibly triggered by faster productivity growth, and some uncertainty and learning about the persistence of both shocks are needed to match the data more satisfactorily. Copyright Blackwell Publishing Ltd. 2005

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.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=infi&volume=8&issue=3&year=2005&part=null
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Wiley Blackwell in its journal International Finance.

Volume (Year): 8 (2005)
Issue (Month): 3 (December)
Pages: 399-434

as
in new window

Handle: RePEc:bla:intfin:v:8:y:2005:i:3:p:399-434
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=1367-0271

Order Information: Web: http://www.blackwellpublishing.com/subs.asp?ref=1367-0271

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. Lane, P, 1999. "The New Open Economy Macroeconomics: A Survey," Trinity Economics Papers 993, Trinity College Dublin, Department of Economics.
  2. Ravi Jagannathan & Ellen R. McGrattan & Anna Scherbina, 2000. "The declining U.S. equity premium," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 3-19.
  3. Stephanie Schmitt-Grohe & Martin Uribe, 2002. "Optimal Fiscal and Monetary Policy Under Sticky Prices," NBER Working Papers 9220, National Bureau of Economic Research, Inc.
  4. Ariel T. Burstein & Joao C. Neves & Sergio Rebelo, 2000. "Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based-Stabilizations," NBER Working Papers 7862, National Bureau of Economic Research, Inc.
  5. Jordi Galí & Mark Gertler & J. David López-Salido, 2002. "Markups, gaps, and the welfare costs of business fluctuations," Working Papers 0204, Banco de España;Working Papers Homepage.
  6. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier.
  7. Schmitt-Grohé, Stephanie & Uribe, Martín, 2001. "Optimal Fiscal and Monetary Policy under Imperfect Competition," CEPR Discussion Papers 2688, C.E.P.R. Discussion Papers.
  8. Jordi Galí & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 707-734.
  9. Alan C. Stockman & Linda L. Tesar, 1990. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," NBER Working Papers 3566, National Bureau of Economic Research, Inc.
  10. Kim, Jinill, 2000. "Constructing and estimating a realistic optimizing model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 329-359, April.
  11. Smets, Frank & Wouters, Raf, 2002. "Openness, imperfect exchange rate pass-through and monetary policy," Journal of Monetary Economics, Elsevier, vol. 49(5), pages 947-981, July.
  12. Robert J. Gordon, 2004. "Why was Europe Left at the Station When America's Productivity Locomotive Departed?," NBER Working Papers 10661, National Bureau of Economic Research, Inc.
  13. Peter N. Ireland, 1999. "Sticky-Price Models of the Business Cycle: Specification and Stability," Boston College Working Papers in Economics 426, Boston College Department of Economics.
  14. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  15. Benigno, Gianluca & Christoph Thoenissen, 2002. "Equilibrium Exchange Rates and Supply Side Performance," Royal Economic Society Annual Conference 2002 19, Royal Economic Society.
  16. Stephen D. Oliner & Daniel E. Sichel, 2000. "The Resurgence of Growth in the Late 1990s: Is Information Technology the Story?," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 3-22, Fall.
  17. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, March.
  18. McCallum, Bennett T. & Nelson, Edward, 1999. "Nominal income targeting in an open-economy optimizing model," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 553-578, June.
  19. Robert J. Gordon, 2002. "Technology and Economic Performance in the American Economy," NBER Working Papers 8771, National Bureau of Economic Research, Inc.
  20. Margarida Duarte & Alan C. Stockman, 2001. "Rational Speculation and Exchange Rates," NBER Working Papers 8362, National Bureau of Economic Research, Inc.
  21. William D. Nordhaus, 2001. "Productivity Growth and the New Economy," NBER Working Papers 8096, National Bureau of Economic Research, Inc.
  22. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, 09.
  23. Kollmann, Robert, 2005. "Macroeconomic effects of nominal exchange rate regimes: new insights into the role of price dynamics," Journal of International Money and Finance, Elsevier, vol. 24(2), pages 275-292, March.
  24. Morrison, C J, 1994. "The Cyclical Nature of Markups in Canadian Manufacturing: A Production Theory Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(3), pages 269-82, July-Sept.
  25. Juillard, Michel & Laxton, Douglas & McAdam, Peter & Pioro, Hope, 1998. "An algorithm competition: First-order iterations versus Newton-based techniques," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1291-1318, August.
  26. Robert J. Gordon, 2003. "Exploding Productivity Growth: Context, Causes, and Implications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 207-298.
  27. Cedric Tille & Nicolas Stoffels & Olga Gorbachev, 2001. "To what extent does productivity drive the dollar?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 7(Aug).
  28. repec:sae:niesru:v:167:y::i:1:p:86-105 is not listed on IDEAS
  29. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
  30. Charles Engel, 1995. "Accounting for U.S. Real Exchange Rate Changes," NBER Working Papers 5394, National Bureau of Economic Research, Inc.
  31. Christopher J. Erceg & Luca Guerrieri & Christopher Gust, 2005. "Expansionary Fiscal Shocks and the US Trade Deficit," International Finance, Wiley Blackwell, vol. 8(3), pages 363-397, December.
  32. Armstrong, John & Black, Richard & Laxton, Douglas & Rose, David, 1998. "A robust method for simulating forward-looking models," Journal of Economic Dynamics and Control, Elsevier, vol. 22(4), pages 489-501, April.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:bla:intfin:v:8:y:2005:i:3:p:399-434. 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: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.