IDEAS home Printed from
   My bibliography  Save this article

The U.S. current account: the other deficit


  • Craig S. Hakkio


Considerable attention has been focused recently on the size and persistence of the U.S. budget deficit. Somewhat lost in the headlines is growing concern among many economists and policymakers over \\"the other deficit\\"--the U.S. current account deficit. Before 1982, U.S. current account deficits were small and temporary, as imports of goods and services rarely exceeded exports for an extended period. Since 1982, however, this deficit has increased significantly and many analysts expect the deficit to remain high well into the next century.> Large current account deficits pose both a short-term risk and a long-term problem for the United States. At present, the United States depends on a commensurately large flow of foreign capital into U.S. markets to finance the current account deficit. If market sentiment were to shift against the United States, higher interest rates and a lower exchange value of the dollar might be necessary to continue to attract foreign capital. In the long term, because financing a chronic deficit requires the United States to borrow from abroad, future interest payments on this debt could lower the standard of living in the United States.> Hakkio examines the current account deficit and its implications. First, he discusses why the current account deficit became large and persistent in the early 1980s. Second, he analyzes the short-term risk that current account deficits pose for the U.S. economy. Finally, he analyzes the long-term problem associated with a chronic current account deficit.

Suggested Citation

  • Craig S. Hakkio, 1995. "The U.S. current account: the other deficit," Economic Review, Federal Reserve Bank of Kansas City, vol. 80(Q III), pages 11-24.
  • Handle: RePEc:fip:fedker:y:1995:i:qiii:p:11-24:n:v.80no.3

    Download full text from publisher

    File URL:
    Download Restriction: no


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

    Cited by:

    1. Cecen, Aydin & Xiao, Linlan, 2014. "Capital flows and current account dynamics in Turkey: A nonlinear time series analysis," Economic Modelling, Elsevier, vol. 39(C), pages 240-246.

    More about this item


    Deficit financing;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedker:y:1995:i:qiii:p:11-24:n:v.80no.3. 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: (). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.