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Fundamentals at Odds? The US Current Account Deficit and Dollar
Author(s) -
MilesiFerretti Gian Maria
Publication year - 2008
Publication title -
economic notes
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.274
H-Index - 19
eISSN - 1468-0300
pISSN - 0391-5026
DOI - 10.1111/j.1468-0300.2008.00204.x
Subject(s) - liberian dollar , current account , odds , economics , balance of trade , effective exchange rate , monetary economics , us dollar , exchange rate , current (fluid) , balance (ability) , international economics , finance , computer science , psychology , logistic regression , engineering , electrical engineering , machine learning , neuroscience
In mid‐2008, the real effective exchange rate (REER) of the dollar was close to its minimum level for the past four decades. At the same time, however, the US trade and current account deficits remain large and, absent a significant correction in coming years, would contribute to a further accumulation of US external liabilities. The paper discusses the tension between these two aspects of the dollar assessment, and what factors can help to reconcile them. It focuses in particular on the terms of trade, adjustment lags and measurement issues related to both the REER and the current account balance.