Current and prospective balance of payments problems
There has been much concern in recent years over “imbalances” in world trade. The United States’ deficit on current account has been the principal focus of attention. It has been associated with continued pressure on the dollar since March 1985 with intermittent sharp movements in exchange rates. Some commentators have warned of the risk of a complete loss of confidence in dollar-denominated financial assets, leading to rising interest rates and recession in the United States.1 Such a recession would have international consequences, especially in the current period of high international indebtedness of many countries.
KeywordsExchange Rate Current Account Real Exchange Rate Trade Balance Income Elasticity
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