Correcting US Imbalances

Ray Barrell, Dawn Holland () and Dr Ian Hurst ()

No 290, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: The US current account deficit is in excess of 6 per cent of GDP, and is leading to an accumulation of debts. We use NiGEM to evaluate the causes of the decline, and suggest that domestic absorption in the US has increased markedly. Nominal realignments and monetary expansions elsewhere are shown to be only short term palliatives. A sustained change in the current account must come either from a real realignment associated with a rise in risk premia on US assets or from a change in domestic absorption in the US and elsewhere. Any adjustment must be associated with a significant change in eth US real exchange rate to induce expenditure switching as well.

Date: 2007-03
New Economics Papers: this item is included in nep-cba and nep-mac
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Related works:
Journal Article: Correcting US Imbalances (2005)
Journal Article: Correcting US Imbalances (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:290

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