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Journal Article
U.S. international transactions in 2001
The U.S. current account deficit narrowed noticeably in 2001. Both imports and exports of goods and services fell during the year in response to a global weakening of economic activity. The decline in the deficit followed a substantial widening during most of the past decade. For 2001, a smaller merchandise trade deficit and a slightly larger surplus in trade in services offset a continued widening of the deficit on investment income. The U.S. current account deficit is the counterpart of a net inflow of foreign capital that represents a source of saving (of more than $400 billion) to help ...
Working Paper
A reassessment of measures of the dollar's effective exchange value
Recent attention has focused on measures of the dollar's effective exchange rate amid disappointment by some observers with the response of the U.S. trade balance to the depreciation of the dollar since February 1985. In particular, these observers suggest that the traditional indexes, which include only currencies of industrial countries, overstate the dollar's decline because it has depreciated much less against the currencies of some key newly industrialized trading partners. ; This paper begins with a description of the uses of effective exchange-rate indexes and describes theoretically ...
Working Paper
External adjustment in selected developing countries in the 1990s
An analytic and accounting framework is presented for examining the evolution of the external positions of eight developing countries: Argentina, Brazil, Chile, Korea, Mexico, Peru, the Philippines, and Venezuela. The framework is used to analyze the historical paths of external debts in these countries. Then, under fairly conventional baseline specifications, and assuming that no other relevant factors change significantly, projections for the debt-export ratios in these eight developing countries are generated, using the analytic framework and a simple simulation model. The baseline ...
Working Paper
Modeling investment income and other services in the U.S. international transactions accounts
This paper presents the services account sector of a model of U.S. international transactions (the USIT model) that is maintained in the Division of International Finance of the Federal Reserve Board. Part I present the models for payments and receipts on direct investment, other investment income, and non-investment services. Part II reports on simulations that indicate the sensitivity of the model's forecast to changes in its predetermined variables such as interest rates and exchange rates. In particular, we explore the implications of large current account deficits and the resulting ...
Working Paper
International economic implications of the end of the Soviet Union
This paper quantifies roughly some potential economic developments in the former Soviet Union (FSU), if substantive economic reforms go forward, and assesses the likely implications of these developments for the rest of the world. It is assumed that a move to world prices for energy and other economic reforms result in a significant increase in FSU net oil exports. This paper develops and analyzes several alternative scenarios, including cases in which the FSU is specified to cooperate with OPEC. The simulations reported in this paper indicate that the FSU countries would be major ...
Working Paper
The U.S. external deficit in the 1980s: an empirical analysis
This paper presents an empirical analysis of the factors that contributed to the unprecedented widening of the U.S. external deficit between 1980 and 1986. The paper presents an empirical model of the U.S. current account that is used to assess the relative importance of changes in U.S. price competitiveness and changes in U.S. and foreign growth as determinants of the deficit. We find that while both factors were significant, the decline in U.S. competitiveness associated with the appreciation of the dollar was the dominant factor. The analysis is also pursued at a more fundamental level, ...
Working Paper
U.S. external adjustment: progress and prospects
This paper presents an empirical analysis of the progress in U.S. external adjustment through 1988 and prospects for continued adjustment over the years ahead. Our analysis, based in part on a partial-equilibrium model of the U.S. current account, suggests that adjustment was slower than "expected" during 1986-87, and faster than expected during the first half of 1988. The model was about "on track" in the second quarter of 1988, but did not anticipate the drop off in the trade balance in the second half of the year. We consider various model extrapolations of the U.S. external balance ...
Journal Article
U.S. international transactions in 1992
Working Paper
Implications for future U.S. net investment payments of growing U.S. net international indebtedness
In the 1980s, the United States developed a large and persistent current account deficit, financed by borrowing from abroad. The purpose of this paper is to explore the sustainability of these large deficits from one of several possible perspectives. Simulations of a model of the U.S. current account are used to examine the future servicing burden implied by the accumulating U.S. indebtedness to foreigners (or more precisely by the negative net international investment position).