We investigate the possibility that the large current account deficits of the U.S. are the outcome of optimizing behavior. We develop a simple long-run world equilibrium model in which the current account is determined by the expected discounted present value of its future share of world GDP...

This paper addresses three questions about the prospects for the U.S. current account deficit. Is it sustainable in the long term? If not, how long will it take for measures of external debt and debt service to reach levels that could prompt some pullback by global investors? And if and when...

The sustainability of the large and persistent U.S. current account deficits is one of the biggest issues currently being confronted by international macroeconomists. Some very plausible theories suggest that the substantial global imbalances can continue in a benign manner, other equally...

The Great Financial Crisis coincided with a sizable reduction in global external imbalances. Although current account balances should not respond to a downturn that is uniform across countries, one that hits countries with current account deficits harder than those with surpluses might result in...

Global value chains (GVCs) have grown rapidly over the past several decades. Over the same period, the aggregate value of current account imbalances has risen substantially. This paper looks at whether these developments are related. While there is a sizable literature that has documented the...

This paper explores the direct effects and spillovers of unconventional monetary and exchange rate policies. We find that official purchases of foreign assets have a large positive effect on a country's current account that diminishes considerably as capital mobility rises. There is an important...

Since 2001, foreign investors have acquired roughly $5 trillion in U.S. securities - more than doubling their holdings of U.S. equities and bonds - as both official and private inflows have financed record U.S. current account deficits. Although the rapid growth of foreign holdings of U.S....