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Adjustment of US External Imbalances: At What Horizon?

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Abstract

The relative importance of the trade and financial (valuation) channels for correcting cyclical external imbalances of the US is examined, with the contribution of each component broken–down by horizon. The evidence presented demonstrate that valuation effects contribute to cyclical external adjustments for horizons less than six quarters. The bulk of cyclical imbalances are shown to be corrected by trade flows, which operate at short– to medium–term horizons, and there seems to be no long-run contribution to the process of cyclical external adjustment.

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  • Panagiotis Th. Konstantinou, 2008. "Adjustment of US External Imbalances: At What Horizon?," Discussion Paper Series 2008_18, Department of Economics, University of Macedonia, revised Dec 2008.
    • Handle: RePEc:mcd:mcddps:2008_18
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    1. Richard H. Clarida, 2007. "G7 Current Account Imbalances: Sustainability and Adjustment," NBER Books, National Bureau of Economic Research, Inc, number clar06-2, June.
    2. Pierre-Olivier Gourinchas & Hélène Rey, 2007. "International Financial Adjustment," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 665-703, August.
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    7. Pierre-Olivier Gourinchas & Hélène Rey, 2007. "From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 11-66, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    international financial adjustment; external imbalances;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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