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The Challenges of Narrowing the US Current-Account Deficit and Implications for Other Economies

By Anne-Marie Brook, Franck Sédillot and Patrice Ollivaud

Abstract

This article uses the OECD’s interlink model to explore several possible channels through which a narrowing of the US current account deficit could occur. The shocks considered include dollar depreciation, fiscal consolidation, and an improvement in the non-price competitiveness of US producers. A key conclusion is that shocks would have to be very large in order to materially reduce the US external deficit, largely because of the offsetting impact of second-round effects. In addition...

DOI identifier: 10.1787/eco_studies-v2004-art7-en
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