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A dynamic analysis of the determinates of the US current account deficit

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  • Rajeev Sooreea
  • Mark Wheeler

Abstract

This article examines the determinates of the US current account deficit. We decompose the trade balance into its import and export components. This allows us to model responses of imports and exports separately. The analysis is conducted with a semi-structural Vector Error Correction Model (VECM). Our results show that a US stock market improvement, a depreciation of the US dollar, an increase in US interest rate and economic growth of the Japanese economy all will help reduce the US trade deficit.

Suggested Citation

  • Rajeev Sooreea & Mark Wheeler, 2010. "A dynamic analysis of the determinates of the US current account deficit," Applied Financial Economics, Taylor & Francis Journals, vol. 20(22), pages 1687-1695.
    • Handle: RePEc:taf:apfiec:v:20:y:2010:i:22:p:1687-1695
    DOI: 10.1080/09603107.2010.524612
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    References listed on IDEAS

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    1. Frankel, Jeffrey, 2006. "Could the twin deficits jeopardize US hegemony?," Journal of Policy Modeling, Elsevier, vol. 28(6), pages 653-663, September.
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    Cited by:

    1. Ali, Amjad & Audi, Marc, 2023. "Analyzing the Impact of Foreign Capital Inflows on the Current Account Balance in Developing Economies: A Panel Data Approach," MPRA Paper 118173, University Library of Munich, Germany.

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