scholarly journals The Exchange Value Of The Dollar And The U.S. Trade Balance: A Partial Equilibrium Empirical Investigation

2011 ◽  
Vol 6 (1) ◽  
Author(s):  
Bahram Adrangi ◽  
Mary Allender ◽  
Kambiz Raffiee
Keyword(s):  
Current Account ◽  
Current Account Deficit ◽  
International Investment ◽  
Current Account Balance ◽  
Exchange Value ◽  
The Many ◽  
International Investment Position ◽  
The Relationship ◽  
The U.S ◽  
The Current Account

The recent depreciation of the dollar against major currencies of the world, notably the euro, has kindled discussion on the causes of this phenomenon and the possible outcomes should it continue. Many politicians blame the rising U.S. current account deficit and some economists have questioned the sustainability of the current account deficit. This paper examines the relationship between the U.S. current account balance, the net U.S. international investment position, and the exchange value of the dollar. Our results show that there is a relationship between the exchange value of the dollar and the current account balance. However, our results do not show that the current account balance is solely responsible for changes in the exchange value of the dollar. This is not surprising given the many influences currently under investigation as possible explanations for the recent behavior of the dollar.

scholarly journals The Twin Deficits Phenomenon: Evidence from Pakistan

2000 ◽  
Vol 39 (4II) ◽  
pp. 535-550 ◽  
Author(s):  
Anjum Aqeel ◽  
Mohammed Nishat
Keyword(s):  
Fiscal Policy ◽  
Current Account ◽  
Budget Deficit ◽  
Current Account Deficit ◽  
Theoretical Work ◽  
Current Account Balance ◽  
Improved Performance ◽  
Necessary And Sufficient ◽  
The Relationship ◽  
The Current Account

Like most developing countries a steady budget deficit in Pakistan is the primary cause of all major ills of the economy. It has varied between 5.4 to 8.7 percent during last two decades. On the other hand the current account deficit varied between 2.7 to 7.2 percent during the same period. The variations in fiscal policy can lead to predictable developments in an open economy’s performance on current account, remains a controversial issue. An important aspect of this issue concerns what is termed as twin deficit analysis, according to which fiscal deficits and current account balances are very closely related so that reductions in the former are both necessary and sufficient to obtain improved performance in the later. Theoretical work on the relationship that exist between variations in fiscal policy and the current account balance has been based upon two types of models. These models are constructed from postulated behavioural relationships that purport to describe how the economy works in aggregate without explaining the behaviour of agents who make up the economy [Mundel (1963); Branson (1976); Dornbusch (1976); Kawai (1985) and Marston (1985)]. The second type of model, derives the important macroeconomic relationships from the microfoundations of individual optimising behaviour [Dixit (1978); Neary (1980); Obstfeld (1981); Persson (1982); Kimbrough (1985); Frenkel and Razin (1986); Cuddington and Vinals (1985, 1986a) and Moore (1989)]. However, both of these approaches have yielded divergent results.

scholarly journals Why did the United States Evolve from the Largest International Creditor in 1980 to the Largest International Debtor in 1990?

2020 ◽  
Vol 48 (4) ◽  
pp. 405-411
Author(s):  
Robert Aliber
Keyword(s):  
Current Account ◽  
Current Account Deficit ◽  
The United States ◽  
Household Wealth ◽  
International Investment ◽  
Domestic Saving ◽  
Net Foreign Assets ◽  
International Investment Position ◽  
The U.S ◽  
Foreign Assets

AbstractRemarkable transformation of the U.S. international investment position occurred over the last 40 years. U.S. net foreign assets were larger than combined net foreign assets of all other creditors. By 1990, foreign-owned U.S. securities and real assets were larger than U.S. owned foreign securities and assets. This change occurred without the U.S. Treasury borrowing in foreign currency and few U.S. firms borrowing, reflecting a surge in foreign purchases of U.S. securities. Inferences from the currency composition of portfolio changes of those who acquired U.S. dollar securities suggest that foreign savers took the initiative on cross-border investment inflows. The U.S. could not have developed a larger capital account surplus after 1980 unless a similar increase in the U.S. current account deficit occurred. The primary factor that led to the U.S. current account deficit increase was the surge in U.S. stocks and other asset prices, resulting in a U.S. household wealth surge and consumption boom. The foreign saving inflow displaced domestic saving. In addition, an increase in the price of the U.S. dollar led to expenditure-switching from U.S. goods to increasingly less expensive foreign goods. When investor demand for U.S. dollar securities declined, the U.S. dollar price fell in 1992, 2002, and 2020 and the price of U.S. dollar securities declined. The paper discusses the source of the change in the U.S. international investment position, the flow of foreign saving to the U.S., cyclical variability in the foreign saving flow to the U.S., and the potential impact of an adjustable parity arrangement.

scholarly journals Perspectives on the U.S. Current Account Deficit and Sustainability

2002 ◽  
Vol 16 (3) ◽  
pp. 131-152 ◽  
Author(s):  
Catherine L Mann
Keyword(s):  
Interest Rates ◽  
Current Account ◽  
Global Economy ◽  
Current Account Deficit ◽  
International Investment ◽  
Capital Inflows ◽  
Foreign Capital Inflows ◽  
International Investment Position ◽  
A Current ◽  
The U.S

This essay considers the underpinnings of the large U.S. current account deficit. It then tackles the question of whether the U.S. current account deficit is sustainable. A current account deficit is “sustainable” at a point in time if neither it, nor the associated foreign capital inflows, nor the negative net international investment position are large enough to induce significant changes in economic variables, such as consumption or investment or interest rates or exchange rates. Even if the current account deficit is sustainable by this definition today, its trajectory could still be creating future risks for the U.S. and global economy.

scholarly journals Implications of the U.S. Current Account Deficit

1989 ◽  
Vol 3 (4) ◽  
pp. 153-165 ◽  
Author(s):  
David H Howard
Keyword(s):  
United States ◽  
Current Account ◽  
Current Account Deficit ◽  
Analytical Framework ◽  
The United States ◽  
Balance Of Payments ◽  
The World ◽  
The U.S ◽  
The Current Account

In 1988, the United States recorded a deficit of about $135 billion on the current account of its balance of payments with the rest of the world. This paper presents an analytical framework for thinking about the current account deficit, explores causes of the current account deficit, and discusses the United States as a debtor nation and the issue of sustainability.

scholarly journals Structural and cyclical factors of Serbia’s current account

2018 ◽  
Vol 63 (217) ◽  
pp. 75-97 ◽  
Author(s):  
Radovan Kovacevic
Keyword(s):  
Current Account ◽  
Structural Changes ◽  
Current Account Deficit ◽  
Current Account Balance ◽  
Full Time ◽  
Structural Factors ◽  
Crisis Period ◽  
The Impact ◽  
The Current Account

This paper examines the impact of structural and cyclical factors on Serbia?s current account. We have applied several filters to turn off the long-term (structural) component and isolate the influence of cyclical factors. In this paper, we show that structural factors were more important determinants of the current account deficit in the full-time sample (1997-2016), while cyclical factors showed a stronger impact in the post-crisis period when the deficit was reduced. Although they lost their intensity during the crisis and in the post-crisis period, the structural factors determine the trend of the current account balance in the long-term. For further improvement of the current account, measures to increase exports should be taken. The structural changes of production, the wider range of support for export financing to small and medium-sized enterprises, and the application of advanced technologies in manufacturing could help to reduce the trade deficit, making the current account deficit sustainable.

scholarly journals Analysis of Current Account Deficit Determinants of Balance of Payments in Fixed and Flexible Exchange Rate Regimes: A Comparative Study in CFA Franc and Non-Franc Zones

2017 ◽  
Vol 3 (3) ◽  
pp. 447
Author(s):  
Remy Hounsou
Keyword(s):  
Current Account ◽  
Current Account Deficit ◽  
Flexible Exchange Rate ◽  
Balance Of Payments ◽  
Current Account Balance ◽  
Domestic Saving ◽  
Franc Zone ◽  
Financial Variables ◽  
The Impact ◽  
The Current Account

<p><em>This study compares the impact of certain economic and financial variables on the level of the deficit in the current account of the balance of payments of the countries of the Franc zone and certain countries of the non-Franc zone situated south of the Sahara. The empirical results of the study based on panel data models covering the period 1990-2015 indicate that none of the two zones behaves better against the current account deficit of the balance of payments and that no zone is more competitive than the other. Finally, it was clear from our analysis that the variables of gross domestic, saving and the change in the terms of trade better explain the change in the current account balance in the Franc zone, whereas the variables of net foreign transfers and gross domestic saving impact the most the current account deficit in non-CFA zone.</em></p>

The Relationship of the Current Account Balance and the Budget Balance

1993 ◽  
Vol 37 (2) ◽  
pp. 78-84 ◽  
Author(s):  
L.E. Winner
Keyword(s):  
Current Account ◽  
Equivalence Theorem ◽  
The Other ◽  
Current Account Balance ◽  
Traditional Theory ◽  
Ricardian Equivalence ◽  
Budget Balance ◽  
Relationship Of ◽  
The Relationship ◽  
The Current Account

This paper demonstrates that the traditional theory, that the current account balance and the budget balance are positively related, does not uphold when applied to Australian data. On the other hand, Australian data seems to indicate that Ricardian Equivalence Theorem better explains the movements in the economy.

scholarly journals The Reasons for Additional Growth Limit of Consumer Non-Purpose Loans in the Banking Sector of Bosnia and Herzegovina

2018 ◽  
Vol 15 (26) ◽  
Author(s):  
Dragan Jović
Keyword(s):  
Economic Growth ◽  
Current Account ◽  
Banking Sector ◽  
Current Account Deficit ◽  
Point Of View ◽  
Current Account Balance ◽  
Economic Point ◽  
Consumer Loans ◽  
Growth Limit ◽  
The Current Account

The growth in consumer non-purpose loans leads to the reduction in BiH current account balance and amplifies the current account deficit. According to regression models, the commercial loan has the same effect on the current account. However, in dynamic VAR models, a commercial loan has, either neutral influence on the current account balance, or contributes to its mild growth. A commercial loan is necessary for BiH economy, because the private sector is the main factor of the economic growth, while a consumer non-purpose loan generates mainly demand for import. When a credit growth is very low, the credit is economic and not free good and additional need for the direct regulation of credit appears, especially in countries with underdeveloped financial market. The share of private companies in the credit distribution is reduced and from the economic point of view, redistribution of loans can be made only at the expense of consumer loans. Additional growth limit on the consumer non-purpose loan, which is composed of 74.2% of total consumer loans, and 34.9% of all bank’s loans (10/2016), is one of the preconditions for the decrease of current account deficit, economic growth and economic development acceleration.

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