 Postponing Global Adjustment: An Analysis of the Pending Adjustment of Global ImbalancesNo WP05-6, Working Paper Series from Peterson Institute for International Economics Abstract: Halving the US current account deficit as a share of GDP is likely to impose a burden of $2,350 per capita on the United States, which explains why US policymakers want to postpone adjustment. The rest of the world relies on the economic stimulus of a widening US external deficit, which explains why they are not eager to see global adjustment. The paper examines three scenarios of exchange rate adjustments, calls on the Federal Reserve to take more account of the external deficit in its words and policy actions, and familiarly notes the need for US fiscal adjustment as part of an efficient adjustment process. Complementary policies are required in the rest of the world. The paper discusses the pattern of recent international capital flows and proposes an international reserve diversification standard to remove some of the uncertainty about the management of foreign exchange reserves. Keywords: Monetary policy; fiscal policy; current account adjustment; open economy macro; central banks and their policies; foreign exchange (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:iie:wpaper:wp05-6 Access Statistics for this paper More papers in Working Paper Series from Peterson Institute for International Economics Contact information at EDIRC. |
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