Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate / Martin S. Feldstein.

Format:

Book

Author/Creator:

Feldstein, Martin S.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13952.

NBER working paper series no. w13952

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Resolving the Global Imbalance

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

The large trade and current account deficits of the United States cannot continue indefinitely because doing so would constitute a permanent gift to the U.S. economy. The process that will cause this gift to shrink and that will eventually cause it to reverse is a fall in the dollar. The dollar will fall as private investors and governments become unwilling to accept the risk of increasing amounts of dollars in their portfolios, especially in a context in which they realize that the dollar must fall to reduce the trade imbalance. Although a more competitive dollar is the mechanism that will cause the U.S. trade deficit to decline, the fundamental requirement for a lower trade deficit is an increase in the U.S. national saving rate. So a rise will be driven by higher household savings of the coming years as the two primary forces that depressed savings in recent years are reversed: the exceptionally rapid rise in household wealth and the high level of mortgage refinancing with equity withdrawal.

Notes:

Print version record

April 2008.