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The Current Account Deficit And The Fixed Exchange Rate. Adjusting Mechanisms And Models

Author

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  • NEGREA Adrian
  • HATEGAN D.B. Anca

Abstract

The main purpose of the paper is to explain what measures can be taken in order to fix the trade deficit, and the pressure that is upon a country by imposing such measures. The international and the national supply and demand conditions change rapidly, and if a country doesn’t succeed in keeping a tight control over its deficit, a lot of factors will affect its wellbeing. In order to reduce the external trade deficit, the government needs to resort to several techniques. The desired result is to have a balanced current account, and therefore, the government is free to use measures such as fixing its exchange rate, reducing government spending etc. We have shown that all these measures will have a certain impact upon an economy, by allowing its exports to thrive and eliminate the danger from excessive imports, or vice-versa. The main conclusion our paper is that government intervention is allowed in order to maintain the balance of the current account.

Suggested Citation

  • NEGREA Adrian & HATEGAN D.B. Anca, 2010. "The Current Account Deficit And The Fixed Exchange Rate. Adjusting Mechanisms And Models," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 73-77, July.
    • Handle: RePEc:ora:journl:v:1:y:2010:i:1:p:73-77
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    File URL: http://anale.steconomiceuoradea.ro/volume/2010/n1/010.pdf
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    References listed on IDEAS

    as
    1. Giurgiu Adriana, 2008. "The Renewal Of The Re-Launched Lisbon Agenda For A More Competitive Europe Without Barriers," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 318-325, May.
    2. Dumitru, Ionut, 2008. "O evaluare a sustenabilitatii deficitului de cont curent in Romania [An assessment of the current account sustainability in Romania]," MPRA Paper 18614, University Library of Munich, Germany.
    3. Adriana Giurgiu, 2008. "The Leading Economic Sectors Building Comparative and Competitive Advantages in Romania's Foreign Trade," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 5(5(522)), pages 11-44, May.
    4. GIURGIU Adriana, 2009. "The Competitiveness Of The Romanian Exports During The Eu Integration Process," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 310-317, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    current account; trade deficit; trade surplus; absorption; elasticity; the Keynesian multiplier model of national income; fixed and floating exchange rate.;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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