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The US current account deficit: smoothly along the adjustment path
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Resumo(s)
Current Global Imbalances are a source of great concern for most economic policy leaders and
scholars. Along with it, particularly US Current Account deficit, economic literature has spurred. As
importantly as explaining how the present situation arose, it is relevant to have a prospective view of what is to follow.
The aim of this Work project is to discuss adjustment and sustainability of the US CA deficit, and
prospective impacts for the rest of the World. Numbers show that US CA deficit has reached new all time highs, so it seems interesting to discuss possible adjustment paths for its reversal.
Based on recent literature and empirical data analysis, an argument for smooth adjustment is put
forward. Firstly, theoretical foundations behind possible smoother adjustment are presented; secondly, soft landing scenarios are tested using Cavallo and Tille's 3-Region Model for Global Imbalances reversal [1].
The main conclusion is that a soft landing of the dollar is possible through automatic stabilizers,
given that there is political will to create a favourable context. This is in direct contrast to some more pessimistic approaches regarding this issue.
Descrição
A Work Project, presented as part as the requirements for the Award of a Masters Degree in Economics from the Nova School in Business and Economics
Palavras-chave
US Current Account Imbalance ER Adjustment Sustainable Net Investment Position