Arbeitspapier

Global rebalancing in a three-country model

This paper extends the model of Engler et al. (2007) on the adjustment of the US current account to a three-country world economy. This allows an analysis of the differential impact of a reversal of the US current account on Europe and Asia. In particular, the outcomes under different exchange rate policies are analysed. The main finding is that large factor re-allocations from non-tradables to tradables will be necessary in the US. The direction of factor re-allocation in Asia depends on whether the Bretton-Woods-II regime of unilaterally fixed or manipulated exchange rates in Asia is continued. If this is the case, the tradables sector and the current account surplus will continue to grow even when the US deficit closes. The flip side of this result is that Europe will face a huge real appreciation and an enormous current account deficit. With floating exchange rates worldwide, the impact on Europe will be limited while Asia´s tradables sector will shrink.

ISBN
3938369957
Language
Englisch

Bibliographic citation
Series: Diskussionsbeiträge ; No. 2009/1

Classification
Wirtschaft
Current Account Adjustment; Short-term Capital Movements
Open Economy Macroeconomics
Subject
Global imbalances
US current account deficit
dollar adjustment
sectoral adjustment

Event
Geistige Schöpfung
(who)
Engler, Philipp
Event
Veröffentlichung
(who)
Freie Universität Berlin, Fachbereich Wirtschaftswissenschaft
(where)
Berlin
(when)
2009

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Engler, Philipp
  • Freie Universität Berlin, Fachbereich Wirtschaftswissenschaft

Time of origin

  • 2009

Other Objects (12)