Journal Article

U.S. international transactions in 1998

Abstract: U.S. external deficits widened substantially in 1998 because of the disparity between the rapid pace of U.S. economic growth and sluggish growth abroad and also because of the decline in the price competitiveness of U.S. goods associated with the appreciation of the dollar. The nominal current account deficit reached $233 billion in 1998, compared with $155 billion in 1997; the 1998 deficit was 2.7 percent of U.S. gross domestic product, the largest share since 1987. Most of the widening in the deficit was in trade in goods and services. The financial crises in Asia that emerged in the second half of 1997 caused U.S. exports to drop sharply in the first half of 1998. Robust U.S. domestic demand was largely responsible for the brisk rise in imports during the year. Net investment income was negative in 1998 for the second consecutive year. Cumulative deficits in the current account, and the associated capital inflows that have persisted since 1982, have resulted in payments of income on foreign investment in the United States growing more rapidly than receipts of income on U.S. investments abroad. The fallout from the financial crises in emerging markets is likely to have further negative consequences for U.S. external balances in 1999.

Keywords: International trade; Exports; Imports;

JEL Classification: F14; F31; F21; F32;

https://doi.org/10.17016/bulletin.1999.85-5

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Federal Reserve Bulletin

Publication Date: 1999-05

Volume: 85

Issue: May