Adjustment of the US current account deficit

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Title: Adjustment of the US current account deficit
Author: Kortelainen, Mika
Organization: Suomen Pankki
Series: Bank of Finland Research Discussion Papers
Series number: 9/2007
Year of publication: 2007
Publication date: 8.3.2007
Keywords: R&D; kilpailu; innovaatiot; valtiontuki; yritykset; Suomi; patentit;
JEL: E61; F32
Abstract: We present a two country DGE model and estimate it using Bayesian techniques and euro area and US quarterly data for 1977 2004. In analysing the current accounts we find that a lower US rate of time preference or a higher dollar risk premium could render the deficit sustainable, but that these could push the interest rate to the zero bound. Secondly, we find that fiscal policy is not sufficiently effective to improve the current account although the zero bound is not hit. Key words: current account, zero bound, policy coordination JEL classification numbers: E61, F32
Rights: https://helda.helsinki.fi/bof/copyright


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