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THE USA AS THE ‘DEMANDER OF LAST RESORT’ AND THE IMPLICATIONS FOR CHINA'S CURRENT ACCOUNT
Author(s) -
Aizenman Joshua,
Jinjarak Yothin
Publication year - 2009
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2009.00450.x
Subject(s) - current account , economics , china , current (fluid) , macroeconomics , developing country , international economics , monetary economics , economic growth , exchange rate , geography , archaeology , engineering , electrical engineering
. The present paper evaluates the current account patterns of 69 countries during 1981–2006. We identify an asymmetric effect of the USA as the ‘demander of last resort’: a 1% increase in the lagged US imports/GDP is associated with a 0.3% increase in current account surpluses of countries running surpluses, but results in insignificant changes in the current accounts of countries running deficits. The impact of US demand variables is larger on the current accounts of developing countries than that of OECD countries. We also contemplate China's current account over the next 6 years, and project a large drop in its current account/GDP surpluses.