English, Article edition: Global Imbalances, Productivity Differentials, and Financial Integration Suparna Chakraborty; Robert Dekle

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Physical Description
  • article
Language
  • English

Edition details

Title
  • Global Imbalances, Productivity Differentials, and Financial Integration
Author
  • Suparna Chakraborty
  • Robert Dekle
Physical Description
  • article
Notes
  • This paper builds a two-country model with differential productivity and financial frictions to quantitatively account for the recent increase in the U.S. current account deficit. An influential literature says that as U.S. productivity surged, capital was attracted to the United States to take advantage of the high returns to investment. We show, however, that when we include emerging Asia, the gap in productivity growth between the United States and the rest of the world cannot explain the U.S. current account deficits, especially since 2000. This is because on a gross domestic product-weighted basis, the rest of the world actually had higher productivity growth during this period; and standard macroeconomic models would predict an outflow of funds from the United States to the rest of the world, and a consequent narrowing of the U.S. current account deficit. This paper shows that greater financial integration abroad can explain this anomaly. However, we still cannot explain why U.S. per capita output growth has been so low, despite the large inflow of capital. IMF Staff Papers (2009) 56, 655–682. doi:10.1057/​imfsp.2009.4; published online 31 March 2009
  • RePEc:pal:imfstp:v:56:y:2009:i:3:p:655-682
Language
  • English
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