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Perceived Welfare Effects of Current Account Deficit - Evidence from American Economy 1967-2005

Author

Listed:
  • Sebastian Stolorz

    (University of Oregon)

Abstract

The paper addresses the question, whether the increasing current account deficit has negative impact on American economy and society. Using data for American economy in years 1967 – 2005, it will be shown that perceived welfare effects, as measured by changes in Consumer Confidence, asymmetrically reflect changes in exports and imports. The provided VAR analysis allowed to filter out potential output and cyclical movements in endogenous factors and to describe the remaining error in terms of external trade volatility. Keeping information on exports and imports as external factors allowed to estimate a structure of the model, where the responsiveness of perceived welfare in respect to simulated changes in current account was studied. The provided analysis shows that opening the economy enhanced observed volatility of the Consumer Confidence, while presence of the current account deficit allowed to obtain superior welfare.

Suggested Citation

  • Sebastian Stolorz, 2005. "Perceived Welfare Effects of Current Account Deficit - Evidence from American Economy 1967-2005," International Trade 0512013, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpit:0512013
    Note: Type of Document - pdf; pages: 37
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/0512/0512013.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Current Account; Trade Liberalization; Welfare;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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