The pattern of international trade adjustment is affected by the continuing international role of the dollar and related evidence on exchange rate pass-through to prices. This paper argues that a depreciation of the dollar would have asymmetric effects on flows between the United States and its...

Rebalancing the large U.S. trade deficits could take different paths. Based on model simulations, the paper shows that if rebalancing is based solely on a sharp cut in the U.S. domestic demand, a recession will be inevitable for the U.S. economy, and the adverse impact for the global economy...