A dynamic analysis of the determinates of the US current account deficit

Rajeev Sooreea and Mark Wheeler

Applied Financial Economics, 2010, vol. 20, issue 22, 1687-1695

Abstract: This article examines the determinates of the US current account deficit. We decompose the trade balance into its import and export components. This allows us to model responses of imports and exports separately. The analysis is conducted with a semi-structural Vector Error Correction Model (VECM). Our results show that a US stock market improvement, a depreciation of the US dollar, an increase in US interest rate and economic growth of the Japanese economy all will help reduce the US trade deficit.

Date: 2010
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DOI: 10.1080/09603107.2010.524612

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