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Global Imbalances and Structural Change in the United States

Author

Listed:
  • Kim Ruhl

    (New York University Stern School of Busi)

  • Joseph Steinberg

    (Univ of Minnesota)

  • Timothy Kehoe

    (University of Minnesota)

Abstract

The United States has borrowed heavily from the rest of the world since the early 1990s. We build a model where this borrowing is driven by foreign demand for saving – a global savings glut – that matches the dynamics of the U.S. trade balance, real exchange rate, sector-level trade balances, and reallocation of labor across sectors. We use our model to study what will happen when the savings glut ends. The U.S. will run a permanent trade surplus and its real exchange rate will depreciate substantially, but goods sector employment will continue to fall. A sudden stop will cause a sharp trade balance reversal, large real exchange rate depreciation, and painful reallocation across sectors but will have little lasting impact on the U.S. economy’s trajectory.

Suggested Citation

  • Kim Ruhl & Joseph Steinberg & Timothy Kehoe, 2013. "Global Imbalances and Structural Change in the United States," 2013 Meeting Papers 1089, Society for Economic Dynamics.
  • Handle: RePEc:red:sed013:1089
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    More about this item

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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