Global Rebalancing with Gravity: Measuring the Burden of Adjustment

Robert Dekle (), Jonathan Eaton () and Samuel Kortum ()

No 13846, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use a forty-two country model of production and trade to assess the implications of eliminating current account imbalances for relative wages, relative GDP's, real wages, and real absorption. How much relative GDP's need to change depends on flexibility of two forms: factor mobility and the adjustment in sourcing of imports, with more flexibility requiring less change. At the extreme, US GDP falls by 30 percent relative to the world's. Because of the pervasiveness of nontraded goods, however, most domestic prices move in parallel with relative GDP, so that changes in real GDP are small.

JEL-codes: F10 F32 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-int and nep-opm
Date: 2008-03
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Journal Article: Global Rebalancing with Gravity: Measuring the Burden of Adjustment (2008)
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