How to buy a trade surplus

Joseph Gagnon and Nishtha Agrawal ()
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Nishtha Agrawal: Peterson Institute for International Economics

No WP26-13, Working Paper Series from Peterson Institute for International Economics

Abstract: Global trade imbalances have gained attention following President Donald Trump's reelection, with China's trade surplus increasing and the US trade deficit remaining historically high. This paper estimates models that can explain nearly half of the historical imbalances, with a large share of the imbalances arising from government policies. The evidence strongly suggests that governments can buy current account surpluses. The paper extends previous research (Gagnon and Sarsenbayev 2021) by six years and roughly 1,000 observations.

Keywords: current account; fiscal balance; foreign exchange intervention; official financial flows (search for similar items in EconPapers)
JEL-codes: F32 F41 F42 (search for similar items in EconPapers)
Date: 2026-07
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