EconPapers    
Economics at your fingertips  
 

Understanding the Dynamics of the US External Position

Martin Evans and Alberto Fuertes ()
Additional contact information
Martin Evans and Alberto Fuertes: Department of Economics, Georgetown University, http://www9.georgetown.edu/faculty/evansm1/

Authors registered in the RePEc Author Service: Martin Evans ()

Working Papers from Georgetown University, Department of Economics

Abstract: This paper studies the dynamics of the U.S. external position for the past 35 years, and examines alternative paths for future external adjustment. We develop a new present value expression for the external position that embeds the restrictions of international solvency and can be easily empirically evaluated with time series methods. Our empirical model accounts for almost all the variations in the U.S. external position between 1973 and 2008. We estimate that most of the quarter-by-quarter changes in the U.S. external position over this period are due to news about future returns and trade flows, but over long horizons the changes reflect prior expectations about how the U.S. would meet its international financial obligations. Importantly, we identify the expectations embedded in the current U.S. external position that contain relevant information about the future adjustment paths. These expectations indicate that the half-lives for future adjustment paths towards U.S. external balance are at least 13 years and involve a significant real depreciation of the dollar.

Keywords: Capital Flows; External Imbalances; International Debt; International Solvency (search for similar items in EconPapers)
JEL-codes: F31 F32 F34 (search for similar items in EconPapers)
Date: 2010-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www8.georgetown.edu/departments/economics/pdf/1005.pdf Full text (application/pdf)
None

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:geo:guwopa:gueconwpa~10-10-05

Ordering information: This working paper can be ordered from
Roger Lagunoff Professor of Economics Georgetown University Department of Economics Washington, DC 20057-1036
http://econ.georgetown.edu/

Access Statistics for this paper

More papers in Working Papers from Georgetown University, Department of Economics Georgetown University Department of Economics Washington, DC 20057-1036.
Series data maintained by Marcia Suss ().

 
Page updated 2017-09-20
Handle: RePEc:geo:guwopa:gueconwpa~10-10-05