The US Current Account, New Economy Services, and Implications for Sustainability

Catherine L. Mann

68 citations0/0 files storedReview of International Economics

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Global Financial Crisis and Policies Global trade and economics Economic Theory and Policy

Abstract

Abstract The paper considers the implications for sustainability of the US current account of widespread uptake of New Economy services around the world. The main contribution is to estimate new income elasticities for international trade in New Economy services and incorporate these in a simple model of the current accounts. Widespread uptake of New Economy services around the world improves the potential for a sustainable US external balance through two channels. First, uptake of New Economy services raises global growth. Second, it narrows the asymmetry in income elasticity of US trade. But, reasonable estimates of these two structural improvements are not sufficient to stabilize the US current account deficit.

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References

1976Expectations and Exchange Rate Dynamics 1969Income and Price Elasticities in World Trade 2002Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration 1987The Persistence of the U.S. Trade Deficit 2002Perspectives on the U.S. Current Account Deficit and Sustainability 2003'Changing Gear': Productivity, ICT and Service Industries in Europe and the United States 2000Current Account Adjustment in Industrialized Countries 2001Services in the International Economy

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