Fundamentals at Odds? The U.S. Current Account Deficit and The Dollar

November 1, 2008

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Format: Chicago

Gian M Milesi-Ferretti. Fundamentals at Odds? The U.S. Current Account Deficit and The Dollar, (USA: International Monetary Fund, 2008) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The real effective exchange rate of the dollar is close to its minimum level for the past 4decades (as of September 2008). At the same time, however, the U.S. trade and currentaccount deficits remain large and, absent a significant correction in coming years, wouldcontribute to a further accumulation of U.S. external liabilities. The paper discusses thetension between these two aspects of the dollar assessment, and what factors can helpreconcile them. It focuses in particular on the terms of trade, adjustment lags, andmeasurement issues related to both the real effective exchange rate and the current accountbalance.

Subject: Current account balance, Current account deficits, External position, Real effective exchange rates, Trade balance

Keywords: Current account, Dollar, Exchange rate, Rate of return, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/260
Stock No:

WPIEA2008260
ISBN:

9781451871180
ISSN:

1018-5941

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