The Long Run Determinants of the US External Imbalances∗

نویسنده

  • Andrea Ferrero
چکیده

This paper develops a tractable two-country model with life-cycle structure to investigate the interaction and the relative importance of productivity growth, demographic factors and fiscal policy in accounting for the evolution of the US external imbalances during the last three decades. The results suggest that (i) productivity growth differentials drive the directionality of capital flows in the medium run, (ii) the different evolution of demographic factors across countries explain a large portion of the long run trend, and (iii) fiscal policy plays, at best, a minor role. The main prediction of the analysis is that among industrialized countries capital should generally be expected to flow toward relatively young and rapidly growing economies. The paper also shows that international demographic trends might be an important force behind the recent declining pattern of the world real interest rate and hence sheds some new light on the real side of the interest rate conundrum. ∗This paper is a revised version of the second chapter of my Ph.D. dissertation at New York University and previously circulated with the title “Demographic Trends, Fiscal Policy and Trade Deficits”. I would like to express my gratitude to David Backus, Pierpaolo Benigno, and especially Mark Gertler for their advice and guidance throughout this project. I have also benefited from comments by seminar participants at the Bank of Canada, Board of Governors of the Federal Reserve System, Darden School of Business, European Central Bank, Federal Reserve Bank of Cleveland, Dallas and New York, HEC Montreal, IMT Lucca, New York University, Rutgers University, University of British Columbia, UC Riverside, Econometric Society Summer Meeting 2006 (Minneapolis) and Society for Economic Dynamics 2006 (Vancouver). The views expressed in this paper do not necessarily reflect the position of the Federal Reserve Bank of New York or of the Federal Reserve System. All errors are exclusively my own responsibility. †Macroeconomic and Monetary Studies Function — 33 Liberty Street, 3 floor — New York, NY 10045. E-mail: [email protected] — URL: http://nyfedeconomists.org/ferrero/

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تاریخ انتشار 2007