Journal Article

Should we worry about the large U.S. current account deficit?

Abstract: Is the large current account deficit a problem for the U.S.? Economic theory offers some scenarios in which a current account deficit is a rational response to economic conditions or a response that may even enhance economic welfare. At the same time, recent research suggests that under certain circumstances, a large current account deficit may make the U.S. economy vulnerable to severe disruptions. This Economic Letter explores some recent theories and some data to understand how the current account deficit could be either an optimal outcome or a threatening one.

Keywords: Debts, External; Balance of trade;

Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: FRBSF Economic Letter

Publication Date: 2000

Order Number: 37