1/5
Good thread by Brad Setser on trade imbalances. He notes that the rising surpluses of East Asia and the main oil exporters are almost perfectly aligned with the rising deficit of the US (and a few smaller ones).
Good thread by Brad Setser on trade imbalances. He notes that the rising surpluses of East Asia and the main oil exporters are almost perfectly aligned with the rising deficit of the US (and a few smaller ones).
2/5
That's not a surprise, of course. The balance of payments must balance, and so the surpluses of the largest surplus countries must be largely in line with the deficits of the largest deficit countries.
That's not a surprise, of course. The balance of payments must balance, and so the surpluses of the largest surplus countries must be largely in line with the deficits of the largest deficit countries.
3/5
But in which direction does causality flow? Do US deficits rise to accommodate rising surpluses elsewhere, or are rising global imbalances driven by rising deficits in the US.
But in which direction does causality flow? Do US deficits rise to accommodate rising surpluses elsewhere, or are rising global imbalances driven by rising deficits in the US.
4/5
That is just another way of asking whether foreign savings are pushed into the US by rising excess savings abroad, or are pulled into the US by rising US demand for foreign savings to fund US investment.
That is just another way of asking whether foreign savings are pushed into the US by rising excess savings abroad, or are pulled into the US by rising US demand for foreign savings to fund US investment.
5/5
It may seem counterintuitive to some at first, but Matt Klein and I show in our recent book that once you approach imbalances from the capital side, it seems pretty obvious that global trade imbalances originate mainly in the surplus countries.
It may seem counterintuitive to some at first, but Matt Klein and I show in our recent book that once you approach imbalances from the capital side, it seems pretty obvious that global trade imbalances originate mainly in the surplus countries.
Loading suggestions...