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Channels for Narrowing the US Current Account Deficit and Implications for Other Economies

Listed author(s):
  • Anne-Marie Brook
  • Franck Sédillot
  • Patrice Ollivaud

In this paper the OECD’s interlink model is used to explore several possible channels through which a narrowing of the US current account deficit could occur. The shocks considered include dollar depreciation, fiscal consolidation, and an improvement in the non-price competitiveness of US producers. A key conclusion is that shocks would have to be very large in order to materially reduce the US external deficit. In part, this is because second-round effects, including domestic policy responses, tend to offset the shocks’ initial impact. In addition, it is clear that each of the channels for narrowing the deficit involves risks to growth in the rest of the world, particularly in Japan where the authorities have limited room to use monetary or fiscal policy to offset any contractionary pressures. The exchange rate simulations highlight the fact that more exchange rate flexibility in Asia would spread the burden of adjustment more evenly across US trading partners. Attention is also ... Des canaux permettant de réduire le déficit de la balance courante américaine et leurs implications pour les autres économies Dans cette étude, le model Interlink de l’OCDE est utilisé pour étudier quelques moyens permettant de réduire le déficit courant américain. Les chocs considérés inclus une dépréciation du dollar, une consolidation fiscale et une amélioration de la compétitivité hors-prix des producteurs américains. Un des principaux enseignements de cette étude est que les chocs doivent être suffisamment importants pour diminuer de façon significative le déficit courant des États-Unis. Ceci est dû en partie au fait que les effets de second tour, incluant politiques économiques nationales, tendent à compenser l’impact du choc initial. En plus, chacun des chocs étudiés se traduit par des risques sur la croissance des autres régions du monde, particulièrement au Japon ou la marge de manoeuvre des autorités monétaire et budgétaire pour contrebalancer les pressions récéssionistes est limitée. Les simulations du taux de change soulignent qu’une plus grande flexibilité du taux de change en Asie ...

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 390.

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Date of creation: 18 May 2004
Handle: RePEc:oec:ecoaaa:390-en
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