IDEAS home Printed from https://ideas.repec.org/h/pal/palchp/978-0-230-50105-8_8.html
   My bibliography  Save this book chapter

Foreign Demand

In: The Post-Bubble US Economy

Author

Listed:
  • Philip Arestis

    (University of Cambridge and Levy Economics Institute)

  • Elias Karakitsos

    (University of Cambridge)

Abstract

The buoyancy of the US economy since the end of the Iraq war and the spectacular recovery of exports in the US, the euro area1 and Japan, and we refer to them as (G-3) in what follows, in the third quarter of 2003 have raised hopes of a US-led world recovery. The OECD index of leading indicators has continued to rise and this heralds further strengthening of (G-3) exports in the months ahead. However, the conclusion of a world recovery over a longer horizon depends on the strength of the US economy and the extent of previous changes in competitiveness. In this respect, the US and Japan have gained competitiveness in the last two years, while the euro area has suffered a great loss. However, if the US economy were to grow as fast as potential output in the next two years, then the world economy would recover.2 Such growth would be sufficient to offset previous losses in competitiveness and allow the euro area to enjoy an export-led recovery. Steady growth in the US at potential output is preferable to fast growth in 2004 and weak growth in 2005, but with the same average, because the world recovery would falter. The implication is that domestic demand in the euro area and Japan should be boosted by accommodative economic policy. Although the same effect can be achieved by easy fiscal policy in the US, this may not be desirable at this phase of the US business cycle.

Suggested Citation

  • Philip Arestis & Elias Karakitsos, 2004. "Foreign Demand," Palgrave Macmillan Books, in: The Post-Bubble US Economy, chapter 8, pages 206-234, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-50105-8_8
    DOI: 10.1057/9780230501058_8
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:palchp:978-0-230-50105-8_8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.