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A structural decomposition of the U.S. trade balance: Productivity, demographics and fiscal policy

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  • Ferrero, Andrea

Abstract

The US external deficits have been the most striking manifestation of global imbalances. This paper investigates the contribution of productivity growth, demographics and fiscal policy in accounting for the evolution of the US external imbalances against industrialized countries during the last three decades. Productivity growth plays a dominant role. Demographics explain a non-negligible and nearly permanent component of the US trade deficit. Furthermore, the international demographic transition is crucial for large US external imbalances to be consistent with the persistent decline of world real interest rates observed in the data. Fiscal policy is of minor importance.

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  • Ferrero, Andrea, 2010. "A structural decomposition of the U.S. trade balance: Productivity, demographics and fiscal policy," Journal of Monetary Economics, Elsevier, vol. 57(4), pages 478-490, May.
  • Handle: RePEc:eee:moneco:v:57:y:2010:i:4:p:478-490
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    Cited by:

    1. Carvalho, Carlos & Ferrero, Andrea & Nechio, Fernanda, 2016. "Demographics and real interest rates: Inspecting the mechanism," European Economic Review, Elsevier, vol. 88(C), pages 208-226.
    2. Andrea Ferrero, 2015. "House Price Booms, Current Account Deficits, and Low Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S1), pages 261-293, March.
    3. Modugno, Michele, 2013. "Now-casting inflation using high frequency data," International Journal of Forecasting, Elsevier, pages 664-675.
    4. Zsofia Barany & Nicolas Coeurdacier & Stéphane Guibaud, 2015. "Fertility, Longevity and International Capital Flows," Sciences Po publications info:hdl:2441/5402sfihji9, Sciences Po.
    5. Gourinchas, Pierre-Olivier & Rey, Hélène, 2014. "External Adjustment, Global Imbalances, Valuation Effects," Handbook of International Economics, Elsevier.
    6. Vincenzo Quadrini, 2013. "Imbalances and Policies," International Journal of Central Banking, International Journal of Central Banking, vol. 9(2), pages 89-100, June.
    7. Chadwick C. Curtis & Steven Lugauer & Nelson C. Mark, 2015. "Demographic Patterns and Household Saving in China," American Economic Journal: Macroeconomics, American Economic Association, pages 58-94.
    8. Stephane Guibaud & Keyu Jin & Nicolas Coeurdacier, 2011. "Credit Constraints and Growth in a Global Economy," 2011 Meeting Papers 1040, Society for Economic Dynamics.
    9. Yunus Aksoy & Ron P. Smith & Tobias Grasl & Henrique S. Basso, 2015. "Demographic structure and macroeconomic trends," Working Papers 1528, Banco de España;Working Papers Homepage.
    10. Bárány, Zsófia & Coeurdacier, Nicolas & Guibaud, Stéphane, 2016. "Fertility, Longevity, and Capital Flows," Economics Series 321, Institute for Advanced Studies.
    11. Nicolas Coeurdacier, 2016. "Fertility, Longevity, and Capital Flows," 2016 Meeting Papers 442, Society for Economic Dynamics.
    12. Duncan, Roberto, 2015. "A threshold model of the US current account," Economic Modelling, Elsevier, vol. 48(C), pages 270-280.
    13. Emre Alper & Lorenzo Forni, 2011. "Public Debt in Advanced Economies and its Spillover Effectson Long-Term Yields," IMF Working Papers 11/210, International Monetary Fund.
    14. Coeurdacier, Nicolas & Guibaud, Stéphane & Jin, Keyu, 2015. "Credit constraints and growth in a global economy," LSE Research Online Documents on Economics 62016, London School of Economics and Political Science, LSE Library.
    15. FUJITA Shigeru & FUJIWARA Ippei, 2015. "Declining Trends in the Real Interest Rate and Inflation: Role of aging," Discussion papers 15140, Research Institute of Economy, Trade and Industry (RIETI).
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    17. David Backus & Thomas Cooley & Espen Henriksen, 2013. "Demography and Low-Frequency Capital Flows," NBER Chapters,in: NBER International Seminar on Macroeconomics 2013, pages 94-102 National Bureau of Economic Research, Inc.
    18. SASAKI Yuri & YOSHIDA Yushi, 2017. "Factor Decomposition of Japan's Trade Balance," Discussion papers 17042, Research Institute of Economy, Trade and Industry (RIETI).
    19. repec:wly:econjl:v::y:2017:i:601:p:571-623 is not listed on IDEAS
    20. Ichiro Muto & Takemasa Oda & Nao Sudo, 2012. "Macroeconomic Impact of Population Aging in Japan: A Perspective from an Overlapping Generations Model," Bank of Japan Working Paper Series 12-E-9, Bank of Japan.
    21. Ichiro Muto & Takemasa Oda & Nao Sudo, 2016. "Macroeconomic Impact of Population Aging in Japan: A Perspective from an Overlapping Generations Model," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(3), pages 408-442, August.
    22. Sandra Gomes & Pascal Jacquinot & Matthias Mohr & Massimiliano Pisani, 2013. "Structural Reforms and Macroeconomic Performance in the Euro Area Countries: A Model-Based Assessment," International Finance, Wiley Blackwell, vol. 16(1), pages 23-44, February.
    23. 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).
    24. Liu, Kai & Zhou, Xuan, 2015. "The U.S. Dollar and Global Imbalances," MPRA Paper 64786, University Library of Munich, Germany.
    25. Andrea Ferrero & Carlos Carvalho, 2013. "What Explains Japan's Persistent Deflation?," 2013 Meeting Papers 1163, Society for Economic Dynamics.

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