Perspectives on the U.S. Current Account Deficit and Sustainability

Catherine Mann

Journal of Economic Perspectives, 2002, vol. 16, issue 3, 131-152

Abstract: This essay considers the underpinnings of the large U.S. current account deficit. It then tackles the question of whether the U.S. current account deficit is sustainable. A current account deficit is "sustainable" at a point in time if neither it, nor the associated foreign capital inflows, nor the negative net international investment position are large enough to induce significant changes in economic variables, such as consumption or investment or interest rates or exchange rates. Even if the current account deficit is sustainable by this definition today, its trajectory could still be creating future risks for the U.S. and global economy.

Date: 2002
Note: DOI: 10.1257/089533002760278758
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