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G7 Current Account Imbalances
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G7 Current Account Imbalances: Sustainability and Adjustment

Richard H. Clarida

Abstract

The current account deficit of the United States is more than six percent of its gross domestic product—an all-time high. And the rest of the world, including other G7 countries such as Japan and Germany, must collectively run current account surpluses to finance this deficit. How long can such unevenness between imports and exports be sustained, and what form might their eventual reconciliation take? Putting forth scenarios ranging from a gradual correction to a crash landing for the dollar, this book brings together economists from around the globe to consider the origins, status, and future ... More

Keywords: gross domestic product, G7 countries, current account deficit, current account surpluses, imports, exports, dollar, dot-com bubble, current account adjustments, Euro

Bibliographic Information

Print publication date: 2007 Print ISBN-13: 9780226107264
Published to Chicago Scholarship Online: February 2013 DOI:10.7208/chicago/9780226107288.001.0001

Authors

Affiliations are at time of print publication.

Richard H. Clarida, editor

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Contents

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Introduction

Richard H. Clarida

I Origins of G7 Current Account Imbalances

1 From World Banker to World Venture Capitalist

Pierre-Olivier Gourinchas and Hélène Rey

2 A Global Perspective on External Positions

Philip R. Lane and Gian Maria Milesi-Ferretti

3 Direct Investment, Rising Real Wages, and the Absorption of Excess Labor in the Periphery

Michael P. Dooley, David Folkerts-Landau, and Peter Garber

II Empirical Studies of G7 Current Account and Exchange Rate Adjustment

4 Current Account Deficits in Industrial Countries

Caroline Freund and Frank Warnock

5 Are There Thresholds of Current Account Adjustment in the G7?

Richard H. Clarida, Manuela Goretti, and Mark P. Taylor

6 Current Account Reversals

Muge Adalet and Barry Eichengreen

7 Understanding the U.S. Trade Deficit

Catherine L. Mann and Katharina Plück

III Theoretical Perspectives on Current Account Sustainability and Adjustment

10 Smooth Landing or Crash?

Hamid Faruqee, Douglas Laxton, Dirk Muir, and Paolo A. Pesenti