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Working Paper
The U.S. external deficit: its causes and persistence
This paper presents an empirical analysis of the macroeconomic and microeconomic factors underlying the causes and persistence of the U.S. external deficit in the 1980s. The paper begins with a review of the extensive literature on this subject, and then outlines an analytical framework that synthesizes several different approaches taken in previous studies. The proximate causes of the deficit are assessed using a partial-equilibrium model of the U.S. current account. We find that the decline in U.S. price competitiveness associated with the appreciation of the dollar over the first half of ...
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, ...
Conference Paper
The U.S. external deficit: its causes and persistence
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 ...
Working Paper
International financial markets and the U.S. external imbalance
This paper analyzes movements in the U.S. external imbalance over the 1980s from the perspective of the capital account. It considers the empirical evidence on two competing hypotheses about the causes of the large and persistent net capital inflow during the decade: one that the capital inflow was induced by a substantial increase in the expected rate of return on real fixed investment in the United States relative to other countries, and the other that strong U.S. fiscal stimulus and a declining private savings rate boosted demand for credit in the United States. ; The empirical evidence ...
Working Paper
Trade elasticities for G-7 countries
This paper reports the results of a project to estimate and test the stability properties of conventional equations relating real imports and exports of goods and services for the G-7 countries to their incomes and relative prices. We begin by estimating cointegration vectors and the error-correction formulations. We then test the stability of these equations using Chow and Kalman-Filter tests. The evidence suggests three findings. First, conventional trade equations and elasticities are stable enough, in most cases, to perform adequately in forecasting and policy simulations. Equations for ...