TY  - JOUR
AU  - Sachs,Jeffrey D.
AU  - Roubini,Nouriel
TI  - Sources of Macroeconomic Imbalances in the World Economy:  A Simulation Approach
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2339
PY  - 1987
Y2  - August 1987
UR  - http://www.nber.org/papers/w2339
L1  - http://www.nber.org/papers/w2339.pdf
N1  - Author contact info:
Jeffrey D. Sachs
The Earth Institute at Columbia University
314 Low Library
535 West 116th Street, MC 4327
New York, NY  10027
Tel: 212/854-8704
Fax: 212/854-8702
E-Mail: sachs@columbia.edu

Nouriel Roubini
Department of Economics, KMC 7-83
Stern School of Business, New York University
44 West 4th Street
New York, NY  10012
Tel: 212/998-0886
Fax: 212/995-4218
E-Mail: nroubini@stern.nyu.edu
AB  - This paper uses a global macroeconomic simulation model to identify the factors that have contributed to global trade and financial imbalances in the 1980s. After investigating the properties of monetary and fiscal policies in the model, we examine whether the budgetary shifts in the OECD economies in the 1980s can account for the bulk of trade and exchange rate movements. Our conclusions are mixed. The combination of sharply higher fiscal deficits in the United States and sharply reduced deficits in Japan goes far to explain the movements of the trade balances and exchange rates of the two economies. However, the drop in the dollar vis-a-vis the Yen since late 1985 is not well explained by the model. We also investigate the prospects for a reduction of the U.S. trade deficits if U.S. budget deficits are in fact reduced, as well as the possible role for Japanese monetary and fiscal policies in reducing the trade imbalances of the two countries.
ER  -