TY  - JOUR
AU  - Feldstein, Martin S
TI  - Resolving the Global Imbalance: The Dollar and the U.S. Saving Rate
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13952
PY  - 2008
Y2  - April 2008
DO  - 10.3386/w13952
UR  - http://www.nber.org/papers/w13952
L1  - http://www.nber.org/papers/w13952.pdf
N1  - Author contact info:
Martin S. Feldstein
E-Mail: N/A user is deceased
AB  - 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.
ER  -