Viewing the current account deficit as a capital inflow

Higgins, Matthew; Klitgaard, Thomas

Journal Article

Viewing the current account deficit as a capital inflow

Abstract: With the 1998 current account deficit approaching $225 billion, attention is again focusing on the deficit's impact on U.S. jobs. Although a high deficit does adversely affect employment in export- and import-competing industries, it also means that considerable foreign capital is flowing into the United States, supporting domestic investment spending that stimulates growth and creates jobs.

Keywords: Balance of trade; Investments; Capital movements; Employment (Economic theory); Capital investments;