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Perceived Welfare Effects Of Current Account Deficit – Evidence From American Economy 1967 - 2005

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  • 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," Labor and Demography 0512009, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0512009
    Note: Type of Document - pdf; pages: 37
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    References listed on IDEAS

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    More about this item

    Keywords

    Current Account; Trade Liberalization;

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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