Contributions

  • Giavazzi, Francesco. - Contributor
  • Sa, Filipa. - Contributor
  • National Bureau of Economic Research. - Contributor

Publication

2005 - National Bureau of Economic Research, Cambridge, Mass, Massachusetts

Language

English

Word Count

9,000 words, Guess

Page Count

36 pages

Identifiers

Classifications

  • LCCHB1

Description

"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 increase has been accompanied by a real dollar appreciation until late 2001, and a real depreciation since. The depreciation has accelerated recently, raising the questions of whether and how much more is to come, and if so, against which currencies, the euro, the yen, or the renminbi. Our purpose in this paper is to explore these issues. Our theoretical contribution is to develop a simple portfolio model of exchange rate and current account determination, and to use it to interpret the past and explore alternative scenarios for the future. Our practical conclusions are that substantially more depreciation is to come, surely against the yen and the renminbi, and probably against the euro"--National Bureau of Economic Research web site.

Description

"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 increase has been accompanied by a real dollar appreciation until late 2001, and a real depreciation since. The depreciation has accelerated recently, raising the questions of whether and how much more is to come, and if so, against which currencies, the euro, the yen, or the renminbi. Our purpose in this paper is to explore these issues. Our theoretical contribution is to develop a simple portfolio model of exchange rate and current account determination, and to use it to interpret the past and explore alternative scenarios for the future. Our practical conclusions are that substantially more depreciation is to come, surely against the yen and the renminbi, and probably against the euro"--National Bureau of Economic Research web site.

Subjects

Series Statement

  • NBER working paper series -- no. 11137.
  • Working paper series (National Bureau of Economic Research) -- working paper no. 11137.

Links

Other Editions

  • The U.S. current account and the dollarNational Bureau of Economic Research2005

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