Charles Wyplosz, 14 December 2009

Greece’s public debt is in turmoil. This column says that the country is nowhere near defaulting, but the Greek government should heed the financial markets’ warning and end three decades of fiscal profligacy. It suggests that Greece adopt immediate deep spending cuts and reform its budgetary process to credibly enforce discipline.

Daniel Gros, 11 June 2009

Why should the existence of current account “imbalances” provoke the biggest financial crisis in living history? This column says one has to take into account the way current account deficits are financed and how flow imbalances accumulated into large stock disequilibria. It explains the securitisation leading to the crisis as the product of a maturity mismatch between foreign savers seeking short-term assets and excess supply of long-term US mortgage debt.

Gian Maria Milesi-Ferretti, 12 December 2008

This column argues that the current combination of a weak dollar and a large current account deficit is primarily explained by long lags in the relation between US external accounts and the real effective exchange rate, high oil prices, as well as the "return differential” between US holdings of assets overseas and foreign holdings of US assets. An unwinding of the recent dollar appreciation to the level reached by the U.S. currency over the summer of 2008 could be consistent with a significant reduction in the US current account deficit over the next few years.

Harald Hau, Hélène Rey, 01 September 2008

The sustainability of the US current account depends on foreigners’ willingness to holding US assets. This column discusses new micro-econometric evidence that equity funds rebalance in reaction to increased exchange rate risk. In short, there is a limit to foreigners’ holding of US assets; the US will either have to run a trade surplus in the future, or the dollar must fall to deflate the value of foreigner’s holdings.

Robert Dekle, Jonathan Eaton, Samuel Kortum, 27 August 2008

A correction of international imbalances seems inevitable. What will that entail? This column presents estimates of the changes in trade flows required to rebalance the world’s current accounts and analyses which countries will bear the burdens of adjustment.

Steven Kamin, 26 August 2008

It has become conventional wisdom that international investors’ unusual fondness for US assets helps explain the persistence of the US current account deficit. This column argues that US financial assets have not been demonstrably more attractive than those of other industrial economies.

Giancarlo Corsetti, 06 November 2007

Classic analysis by Obstfeld and Rogoff says that the dollar still has a long way to fall. Some new theory and recent simulations suggests that US trade response may be bigger than expected and so the dollar may have fallen enough.


CEPR Policy Research