U.S. international transactions in 2001

William L. Helkie

Federal Reserve Bulletin, 2002, vol. 88, issue May, 235-247

Abstract: The U.S. current account deficit narrowed noticeably in 2001. Both imports and exports of goods and services fell during the year in response to a global weakening of economic activity. The decline in the deficit followed a substantial widening during most of the past decade. For 2001, a smaller merchandise trade deficit and a slightly larger surplus in trade in services offset a continued widening of the deficit on investment income. The U.S. current account deficit is the counterpart of a net inflow of foreign capital that represents a source of saving (of more than $400 billion) to help finance U.S. domestic investment. To finance the U.S. current account deficit, net private capital flowed in at a record pace in 2001 and included unprecedented net inflows through private securities transactions. If economic activity grows faster in the United States than abroad in 2002, as most forecasters expect, the U.S. external deficit will widen, as U.S. imports of goods and services are likely to expand more rapidly than U.S. exports of goods and services. The degree to which the deficit widens will depend largely on the strength of the economic recovery in our principal trading partners and on the financial effects of that recovery and of the past appreciation of the dollar.

Keywords: International trade; Imports; Exports (search for similar items in EconPapers)
JEL-codes: F14 F21 F32 (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgrb:y:2002:i:may:p:235-247:n:v.88no.5

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DOI: 10.17016/bulletin.2002.88-5

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