We argue that a chronic US current account deficit is an integral and sustainable feature of a successful international monetary system. The US deficit supplies international collateral to the periphery. International collateral in turn supports two-way trade in financial assets that liberates...

Acting on his campaign rhetoric that China is “raping our country,” Donald Trump recently announced additional tariffs on $ 200 billion of Chinese imports. This was on top of earlier tariffs on $ 50 billion worth of imports, including a 25 percent tariff on steel, 10 percent on aluminum, 30...

The significant difference in saving rates between the United States (near-zero) and the developing nations (exceeding 30%) is a contributing explanation for the record U.S. current-account deficit, now almost 700 billion USD per year. Analytic support for this conclusion is provided herein by...

There are two main forces behind the large U.S. current account deficits. First, an increase in the U.S. demand for foreign goods. Second, an increase in the foreign demand for U.S. assets. Both forces have contributed to steadily increasing current account deficits since the mid-1990s. This...

It is unclear whether the exceptionally high U.S. current account deficit can be sustained for a prolonged period. In this paper we approach the topic whether a gradual adjustment or a pronounced reduction of the deficit is likely to occur. We therefore characterize the dynamics of the current...

The robust growth of the U.S. economy between 1996 and 1999 spurred U.S. demand for foreign goods and contributed to a surge in the U.S. trade deficit. An analysis of the effects of the expansion on the trade balance suggests that the economic boom can account for roughly a third of the sharp...

Although natural market forces should resolve such imbalances without the need for specific government policies, the government actions in both countries have actually contributed to their persistence and prevented market forces from correcting the problem. That may be about to change

This paper evaluates the degree to which current account patterns are explained by the variables suggested by the literature, and reflects on possible future patterns. We start with panel regressions explaining the current account of 69 countries during 1981-2006. We identify an asymmetric...

The large trade and current account deficits of the United States cannot continue indefinitely because doing so would constitute a permanent gift to the U.S. economy. The process that will cause this gift to shrink and that will eventually cause it to reverse is a fall in the dollar. The dollar...

We study the evolution of the U.S. current account in a two-country dynamic stochastic endowment model in which a single non-state contingent bond is the only internationally traded asset. The paper focuses on the world `saving glut' as the primary cause of continual deterioration in the current...