The U.S. Dollar and the Trade Deficit : What Accounts for the Late 1990's?

Author/Editor:

Alessandro Rebucci ; Benjamin L Hunt

Publication Date:

October 1, 2003

Electronic Access:

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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:

Based on a version of the IMF’s new Global Economic Model (GEM), calibrated to analyze macroeconomic interdependence between the United States and the rest of the world, this paper asks to what extent an asymmetric productivity shock in the tradable sector of the economy may account for real exchange rate and trade balance developments in the United States in the second half of the 1990s. The paper concludes that the Balassa-Samuelson effect of such a productivity shock is only part of the story. A second shock, a broadly defined “risk premium” shock, and some uncertainty about the persistence of both shocks are needed to match the data more satisfactorily.

Series:

Working Paper No. 03/194

Subject:

English

Publication Date:

October 1, 2003

ISBN/ISSN:

9781451859881/1018-5941

Stock No:

WPIEA1942003

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

41

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