Time for an update on estimated income and price elasticities of US trade flows. These issues are important to those of us who believe that the US remains vulnerable to shifts in the rest-of-the-world’s willingness to finance the current account deficit. If you think it’s just jolly fine and likely for the US to keep on borrowing at around 6.5 percent of GDP for the indefinite future, skip this post.
Category Archives: exchange rates
Estimating equilibrium exchange rates: More reasons for humility
Further implications of the productivity slowdown for the dollar
In a previous post, I noted that the slowdown in economic growth in the US relative to rest-of-OECD would have a number implications for the dollar’s value in nominal and real terms.
A New Era for the Dollar?
Riding the dollar’s decline.
The Coming (?) US Current Account Adjustment: Two Questions Inspired by Two Graphs
The IMF has recently released its Global Financial Stability report. Two figures inspired two questions from me.
Trade adjustment via import compression or export expansion?
From Saturday’s New York Times, the case is made that the G-7’s dream scenario of global rebalancing, with more rapid growth in Europe pulling up demand for US goods, is finally underway:
Exchange rate depreciation and expenditure switching in the United States
The IMF’s April 2007 World Economic Outlook has been released — or at least part of it. One chapter, entitled Exchange Rates and the adjustment of External Imbalances [pdf], deals with a subject close to my heart.
Maybe we can’t count on exorbitant privilege/dark matter/manna from heaven…
The new conventional wisdom is that the return foreigners obtain on U.S. assets is less than the return U.S. residents obtain on foreign assets. And that this means that the U.S. can build up a bigger foreign debt than traditional analyses; I’ve been skeptical [1], [2]. Now, we have more reason to ask how robust is the finding of a durable earnings differential in favor of U.S. investors?
Attaining Internal and External Equilibrium in China
China raises rates again. What will higher rates do?
Negative Net Income: The 2006 Balance of Payments
Most commentary on the 2006q4 current account balance release focused on the improvement in the overall balance. Little noted is the fact that 2006 is the first year in which the net income category has registered negative.