This paper takes up the question of whether market concerns about global imbalances in general, and the US external deficit in particular, are well founded. It reviews four arguments bearing on how concerned we should be about the widening of the US current account deficit since the Asian...

We develop a Global VAR (GVAR) model for current account analysis. The model includes major economies involved in global imbalances and a few key macro variables to comprehensively examine the relations between these economies and the causality of the variables. We estimate the GVAR model based...