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Viewing the current account deficit as a capital inflow

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Abstract

With the 1998 current account deficit approaching $225 billion, attention is again focusing on the deficit's impact on U.S. jobs. Although a high deficit does adversely affect employment in export- and import-competing industries, it also means that considerable foreign capital is flowing into the United States, supporting domestic investment spending that stimulates growth and creates jobs.

Suggested Citation

  • Matthew Higgins & Thomas Klitgaard, 1998. "Viewing the current account deficit as a capital inflow," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 4(Dec).
    • Handle: RePEc:fip:fednci:y:1998:i:dec:n:v.4no.13
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    References listed on IDEAS

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    1. Jonathan McCarthy & Han N. Pham, 1995. "The impact of individual retirement accounts on savings," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 1(Sep).
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    Cited by:

    1. Mohammed I. Ansari, 2004. "Sustainability of the US current account deficit: An econometric analysis of the impact of capital inflow on domestic economy," Journal of Applied Economics, Universidad del CEMA, vol. 7, pages 249-269, November.
    2. Richard Peach & Charles Steindel, 2000. "A nation of spendthrifts? An analysis of trends in personal and gross saving," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 6(Sep).
    3. Özcan Karahan & Olcay Çolak, 2020. "An Examination Of The Causality Relationship Between Current And Financial Accounts In Turkey," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(224), pages 7-28, January –.
    4. Cosimo Magazzino, 2012. "Fiscal Policy, Consumption and Current Account in the European Countries," Economics Bulletin, AccessEcon, vol. 32(2), pages 1330-1344.
    5. Matthew Higgins & Thomas Klitgaard & Cédric Tille, 2005. "The income implications of rising U.S. international liabilities," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 11(Dec).
    6. Amira Karimova & Ahmet Caliskan & Jamshid Karimov, 2017. "Global Credit Supply and External Exposure in Turkey," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 1(1), pages 15-34.
    7. Matthew Higgins & Thomas Klitgaard, 2000. "Asia's trade performance after the currency crisis," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 37-49.
    8. Pilar Beneito & Carlos Chafer, 2017. "Current Account Imbalances and Cost Competitiveness: The Role of the Euro," Working Papers 1703, Department of Applied Economics II, Universidad de Valencia.
    9. Debashis Chakraborty & Jaydeep Mukherjee & Tanaya Sinha, 2012. "Is there any Long-run Relationship between India’s Current and Capital Account Balance? A Time Series Analysis," Global Business Review, International Management Institute, vol. 13(3), pages 433-447, October.
    10. Francesco Forte & Cosimo Magazzino, 2015. "Ricardian equivalence and twin deficits hypotheses in the euro area," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 17(2), pages 148-166, October.
    11. Ansari, Mohammed I., 2004. "Sustainability of the US current account deficit: An econometric analysis of the impact of capital inflow on domestic economy," Journal of Applied Economics, Universidad del CEMA, vol. 7(2), pages 1-21, November.
    12. Stefan Papaioannou & Kei-Mu Yi, 2001. "The effects of a booming economy on the U.S. trade deficit," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 7(Feb).
    13. Matthew Higgins & Thomas Klitgaard, 2004. "Reserve accumulation: implications for global capital flows and financial markets," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 10(Sep).
    14. Chen, Shyh-Wei & Shen, Chung-Hua, 2015. "Revisiting the Feldstein–Horioka puzzle with regime switching: New evidence from European countries," Economic Modelling, Elsevier, vol. 49(C), pages 260-269.

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