TY  - JOUR
AU  - Blanchard,Olivier
AU  - Giavazzi,Francesco
AU  - Sa,Filipa
TI  - The U.S. Current Account and the Dollar
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11137
PY  - 2005
Y2  - February 2005
UR  - http://www.nber.org/papers/w11137
L1  - http://www.nber.org/papers/w11137.pdf
N1  - Author contact info:
Olivier J. Blanchard
International Monetary Fund
Economic Counsellor and Director
Research Department
700 19th Street, NW
Rm. 10-700
Washington DC, 20431
Tel: 202-623-7825
Fax: 202-623-7271
E-Mail: blanchar@mit.edu

Francesco Giavazzi
Universita' Bocconi and IGIER
Via Guglielmo Rontgen, 1
Milan 20136
ITALY
Tel: 0039-02-5836-3304
Fax: 0039-02-5836-3302
E-Mail: francesco.giavazzi@unibocconi.it

Filipa Sa
Bank of England
E-Mail: fgs22@cam.ac.uk
AB  - There are two main forces behind the large U.S. current account deficits. First, an increase in the U.S. demand for foreign goods. Second, an increase in the foreign demand for U.S. assets.  Both forces have contributed to steadily increasing current account deficits since the mid--1990s. This increase has been accompanied by a real dollar appreciation until late 2001, and a real depreciation since. The depreciation has accelerated recently, raising the questions of whether and how much more is to come, and if so, against which currencies, the euro, the yen, or the renminbi.  Our purpose in this paper is to explore these issues. Our theoretical contribution is to develop a simple portfolio model of exchange rate and current account determination, and to use it to interpret the past and explore alternative scenarios for the future. Our practical conclusions are that substantially more depreciation is to come, surely against the yen and the renminbi, and probably against the euro.
ER  -