Fundamentals at Odds? The US Current Account Deficit and The Dollar

Gian Maria Milesi-Ferretti ()

No 7046, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In mid-2008, the real effective exchange rate of the dollar was close to its minimum level for the past 4 decades. At the same time, however, the U.S. trade and current account deficits remain large and, absent a significant correction in coming years, would contribute to a further accumulation of U.S. external liabilities. The paper discusses the tension between these two aspects of the dollar assessment, and what factors can help reconcile them. It focuses in particular on the terms of trade, adjustment lags, and measurement issues related to both the real effective exchange rate and the current account balance.

Keywords: Current account; Real exchange rate; Terms of trade (search for similar items in EconPapers)
JEL-codes: F31 F32 F41 (search for similar items in EconPapers)
Date: 2008-11
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-opm
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Citations: View citations in EconPapers (2)

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Journal Article: Fundamentals at Odds? The US Current Account Deficit and Dollar (2008)
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