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The article explores the commercial and economic incentives behind the arms transfers to Ba'thist Iraq under the administration of U.S. President John F. Kennedy and how these incentives intersected with U.S. strategic goals. The Kennedy administration was satisfied in the seizure of power in Baghdad, Iraq by the Ba'th Party and affiliated nationalist army officers on February 8, 1963. The administration had established a sales force of civilians and active-duty military officers at the Pentagon who eagerly pursued foreign military equipment sales to offset the costs of military assistance programs in the face of an expanding U.S. balance of payments deficit. The pursuit of arms sales reinforced some visions of an effective Cold War strategy for Iraq but conflicted with others.

The article focuses on the role of inter-temporal budget constraints in the United States. The article also provides implications of government budget constraint for the behavior of monetary and fiscal authorities. It is explained that inter-temporal balance of payments equilibrium requires that the current net stock of foreign assets equal the discounted present value of current and expected future current account deficits. The article creates a necessary and sufficient condition for intertemporal budget balance under the assumption that the expected real rate of interest is constant and it is then compared to other tests of present value relationships.

The dramatic increase in the merchandise balance of trade deficit between the United States and its major competitors has prompted a call for policies designed to increase the international competitiveness of the American economy. Policies designed to promote the competitiveness of particular industries must be approached with caution. Unless they are based on a sound understanding of the sources of the economic benefits of trade, they are unlikely to accomplish their objectives. The real key to improving international competitiveness lies in better macroeconomic management of the nation's economy. [ABSTRACT FROM AUTHOR]

This study is a research analysis of the persistent balance of payments problem of the U.S. Because the American companies are more competitive in the high technology industries, the computer manufacturing business is used as the vehicle for this research. [ABSTRACT FROM AUTHOR]

This is a progress report. It introduces a new medium-sized model of the U.S. balance of payments and, to go with it, a macroeconomic model of the domestic economy. It goes on to illustrate uses of the model, including a simple demonstration of the case for making careful, correct assignments of policy instruments to policy targets. [ABSTRACT FROM AUTHOR]

South Africa is one of the emerging market countries that have received a relatively large amount of foreign capital since the mid-2000s. In South Africa's case, these inflows were partly used to build the country's foreign exchange reserves, but more particularly to finance continued large current account deficits. During the course of the past two years, however, adverse domestic political developments, combined with the potential negative impacts of the unwinding of quantitative easing policies and the normalising of monetary policy in the United States on emerging markets in general, has raised the spectre of a sharp slowdown in foreign capital flows to South Africa and an associated reversal of the current deficit. This paper explores the potential impact of such a development on macroeconomic conditions in South Africa. The analysis consists of macroeconometric model-based alternative scenarios backed up by both the international evidence on the impact of such events and South Africa's own history. [ABSTRACT FROM AUTHOR]

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This paper surveys the academic and policy debate on the origins of global imbalances, their prospects after the global crisis, and their policy implications. A conventional view of global imbalances considers them to primarily result from macroeconomic policies and cyclical forces that cause demand for goods to outstrip supply in the United States and other rich countries and that have the opposite effect in major emerging markets. An alternative view holds that global imbalances are the result of structural distortions and slow-changing factors that primarily affect assets markets. This paper reviews the analytical underpinnings of these two perspectives and the empirical evidence of their respective merits. The paper then assesses the outlook for global imbalances after the crisis, particularly in terms of policy action to reduce their magnitude. Policy intervention is warranted to the extent that the imbalances are driven by welfare-reducing distortions, but in this case, the primary target of policy intervention should be the distortions rather than the imbalances. Finally, the paper examines various forms of international spillovers that may call for multilateral action to limit global imbalances. [ABSTRACT FROM AUTHOR]

The United States is capable of becoming an exporting juggernaut if it follows the right policies. This paper discusses what goals the United States should pursue and how it should go about reaching them. The goals should be ambitious-more ambitious than current policy suggests. Gross exports should increase to about 20 percent of GDP, whereas the current account deficit should decline to about 2 percent. The most important instruments to achieve these goals are liberalization of export controls, aggressive pursuit of trade agreements, and exchange rate correction-particularly with China. The paper gives estimates of what can be achieved by these instruments. [ABSTRACT FROM AUTHOR]

This article examines the determinates of the US current account deficit. We decompose the trade balance into its import and export components. This allows us to model responses of imports and exports separately. The analysis is conducted with a semi-structural Vector Error Correction Model (VECM). Our results show that a US stock market improvement, a depreciation of the US dollar, an increase in US interest rate and economic growth of the Japanese economy all will help reduce the US trade deficit. [ABSTRACT FROM AUTHOR]

The global imbalance explanation of the financial crisis of 2007–09 suggests that demand for riskless assets from countries with current account surpluses created fragility in countries with current account deficits, most notably in the United States. This paper examines this explanation by analyzing the geography of asset-backed commercial paper (ABCP) conduits set up by large commercial banks. The paper shows that banks in surplus countries as well as banks in deficit countries manufactured riskless assets, totaling over $1.2 trillion, by selling short-term ABCP to risk-averse investors, predominantly U.S. money market funds, and investing the proceeds primarily in long-term U.S. assets. As negative information about U.S. assets became apparent in August 2007, banks in both surplus and deficit countries experienced difficulties in rolling over ABCP and as a result suffered significant losses. The paper concludes that global banking flows, rather than global imbalances, determined the geography of the financial crisis. [ABSTRACT FROM AUTHOR]

The article looks at the global trade imbalances from 2007 to 2010. It is said that Korea, Russia and Brazil had higher share of world exports, forcing exporting companies to cut their prices in these markets to compete. Only Germany regained its import penetration at levels before the global financial crisis. It also found that the U.S. has larger deficit than China before the global financial crisis.

This paper builds a two-country model with differential productivity and financial frictions to quantitatively account for the recent increase in the U.S. current account deficit. An influential literature says that as U.S. productivity surged, capital was attracted to the United States to take advantage of the high returns to investment. We show, however, that when we include emerging Asia, the gap in productivity growth between the United States and the rest of the world cannot explain the U.S. current account deficits, especially since 2000. This is because on a gross domestic product-weighted basis, the rest of the world actually had higher productivity growth during this period; and standard macroeconomic models would predict an outflow of funds from the United States to the rest of the world, and a consequent narrowing of the U.S. current account deficit. This paper shows that greater financial integration abroad can explain this anomaly. However, we still cannot explain why U.S. per capita output growth has been so low, despite the large inflow of capital.IMF Staff Papers (2009) 56, 655–682. doi:10.1057/imfsp.2009.4; published online 31 March 2009 [ABSTRACT FROM AUTHOR]

This paper addresses three questions about prospects for the U.S. current account deficit. First, is it sustainable in the long term? Projections of a detailed model of the U.S. balance of payments suggest that the current account deficit will resume widening and external indebtedness will continue to expand. Second, how long will it take for indebtedness to rise sufficiently to prompt some pullback by global investors? We project that external debt, net investment income, and the share of U.S. claims in foreigners’ portfolios will take many years to reach levels that would test global investors’ willingness to extend financing. Finally, if and when levels of sustainable debt burden are breached, how readily would asset prices respond and the current account start to narrow? We find little evidence that, as countries’ indebtedness rises, the changes in asset prices and exchange rates needed to correct the current account materialize all that rapidly.IMF Staff Papers (2009) 56, 596–632. doi:10.1057/imfsp.2009.7; published online 26 May 2009 [ABSTRACT FROM AUTHOR]

The subprime mortgage crisis and the resultant inflationary monetary policy in the USA have left the Chinese economy subject to four risks in particular. First, China's exports to the USA might continue to decline. Second, in the medium term, the higher US inflation rate will lead to a weak dollar, which will negatively affect China's exports. Third, in the long term, when the US Federal Reserve decreases money supply to control inflation, the US economy might enter another recession, hurting China's exports further. Fourth, China's foreign exchange reserve assets might suffer heavy losses when the US inflation rate rises. Conventional foreign exchange investment strategies are insufficient for dealing with these four risks. Investment by China in the major US banks is suggested in the present paper. This strategy would mitigate if not eliminate all four risks. China could gain considerable financial returns on investments with only moderate risk. [ABSTRACT FROM AUTHOR]

This study conducts an investigation into the extent of cointegration between imports and exports and asymmetries in the adjustment of the U.S. current account over the study period 1960Q4-2007Q2. We find evidence in favor of cointegration through the application of the standard Johansen methodology. Employing the Trace test procedure recursively, two distinct regimes are identified according to whether or not imports and exports are cointegrated. We also consider the Breitung (2002) and Breitung and Taylor (2003) nonparametric cointegration test procedures that do not assume linear short-run dynamics. Further analysis of the asymmetric short-run dynamics reveals that adjustment towards long-run equilibrium is primarily driven by U.S. exports responding to current account deficits. [ABSTRACT FROM AUTHOR]

In the 2007 Wincott Lecture the author argues that global current account imbalances are an indication of ‘intertemporal trade’. Savings and investment, both private and public, determine the imbalances. He expounds Richard Cooper's argument that it is perfectly natural for the USA to have a big deficit and suggests that the large Chinese surplus may be temporary. [ABSTRACT FROM AUTHOR]

In this article, the author looks at four interrelated deficits facing the U.S. in 2008. The author begins with the federal budget deficit. He indicates the implications of the budget deficit for the country's economy. He then discusses the savings deficit. He believes that this trend is particularly alarming in the country's aging society. He also addresses the balance of payment deficit and its causes, including the declining value of the dollar. Lastly, the author explains the leadership deficit facing the U.S.

The fixation on balancing the federal budget deficit may be self-destructive, argues this economist. Washington is not making the right choices. [ABSTRACT FROM PUBLISHER]

This paper examines the current path of global imbalances and the role of East Asia in addressing these issues. The roots of the problem are the exploding budget deficit and soaring current account deficit of the United States. The twin deficits are being financed by foreign savings including the placement of the massive foreign exchange reserves of East Asia in U.S. dollar-denominated debt, such as U.S. Treasury notes. Solving the imbalances will require corrections of internal and external imbalances by both the United States and its trading partners. How East Asia deploys its reserves could set off a tsunami of sales of dollar-based assets that could disrupt the U.S. and global economy. Sharp exchange rate adjustments (particularly a large fall in the U.S. dollar), and a protectionist backlash against the U.S. current account deficit, are in no one's interest as they could trigger global shocks. [ABSTRACT FROM AUTHOR]

The article reflects on the current account deficit in the U.S. The author stresses that the size and duration of this deficit is of an unprecedented scale. He emphasizes the need of the country to reduce its fiscal deficit in a convincing manner. He asserts that foreign exchange intervention is only effective in emerging market countries.

The article discusses the medium- to long-term imbalances of U.S. fiscal and current account deficits. The current account deficit increased to $791 billion in 2005 from $665 billion in 2004, and is likely to grow to more than $950 billion in 2006. Short-term interest rate differential, growth differential factor and relative returns in equity markets are some of the factors that will weaken the dollar in 2006. The U.S. is suggested to start addressing its own fiscal and saving imbalances.

This paper examines the recent history of the U.S. current and capital accounts, models some likely paths for them in the years ahead, and examines historical episodes of sustained deficits and growing foreign indebtedness in other countries for clues to how serious a risk the present U.S. situation entails. This paper also analyzes the relationship between the dollar and the U.S. current account, with particular attention to the issue of sustainability and the mechanics of current account adjustment. The author develops a portfolio model of the current account and shows that, even under a very positive scenario where foreigners' demand for U.S. assets doubles from its current level, the U.S. current account will have to go through a significant adjustment in the not-too-distant future. Indeed, one cannot rule out a scenario where the U.S. current account deficit shrinks abruptly by 3 to 6 percent of GDP. To get an idea of the possible consequences of such an adjustment, the author also analyzes the international historical evidence on current account reversals. The results of this empirical investigation indicate that significant current account reversals have tended to result in large declines in GDP growth.

This paper focuses on the growing U.S. current account deficit and the potentially sharp exchange rate movements any future adjustment toward current account balance might imply. The authors argue that the speed at which the U.S. current account ultimately returns toward balance, the triggers that drive that adjustment, and the way in which the burden of adjustment is allocated across Europe and Asia all have enormous implications for global exchange rates. This paper begins by trying to put the recent U.S. experience with current account imbalances in historical perspective. The authors then provide a nontechnical summary of the authors' core three-region model. The paper's final section highlights the main conclusions that the authors draw from the technical analysis.

This article focuses on the global demand for the U.S. dollar and the sustainability of the U.S. current account deficit. For more than twenty years the world's richest, most mature industrial economy has drawn heavily on the world's limited pool of saving to support high consumption. Over the past decade, personal saving has fallen more than government saving has increased. The huge deficit in the current account of the U.S. balance of payments, equivalent to about 4.4 percent of gross national product (GNP) in 2000, reflects this saving gap. On a flow basis, the U.S. now attracts more capital, net, than all developing countries combined. The international balance sheet of the U.S. has declined in corresponding fashion. From being a net creditor to the rest of the world at the beginning of the 1980s, the U.S. transformed itself into the world's largest net debtor. The cumulative effect of this private foreign borrowing over the last ten years is now reflected in the balance sheets of both U.S. firms and households. The indebtedness of the personal sector is now a record 1.03 times disposable income and firms in the aggregate also show a very high indebtedness relative to cash flow. To the present day, the dollar is still the main vehicle currency in the interbank spot and forward exchange markets, the currency of invoice for primary commodity trade and for many industrial goods and services, and the main currency of denomination for international capital flows, particularly short-term and interbank flows.

This article studies the sustainability of large current account deficits in the balance of payments of the U.S. It is estimated that in 2001, the U.S. current account deficit will reach $450 billion or 4.4 percent of gross domestic product, up from 3.6 percent in 1999. Current account balance was last achieved in 1991. It is useful to put the U.S. deficit into the global context of foreign trade. But globally the numbers do not add up. In principle, the world should be in current account balance every period. In fact, the records show a deficit of $130 billion for 1999, suggesting substantial underrecording of receipts. Thus the recorded deficit is undoubtedly exaggerated, perhaps by tens of billions of dollars. Even this correction, however, would still leave a U.S. deficit that is large by twentieth-century standards, and a dominating feature of the world economy in recent years. It is often suggested that the large current account deficit poses a serious financing problem for the U.S. In economic terms it is more nearly correct to say that net capital inflows cause the current account deficit. The basic story of the past two decades is that, on balance, foreigners have wanted to buy more U.S. assets than what the U.S. have wanted to invest abroad. The language of current account deficits is unfortunate. It reverses the economic logic and suggests that in the U.S. case a deficit is undesirable, even though it reflects a vote of confidence by the rest of the world in the U.S.