Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
968179 | Journal of Policy Modeling | 2007 | 7 Pages |
Abstract
This article explains why the dollar is above its long run equilibrium level and why it will decline. The fundamental reason for the strong dollar is that the US saving rate is very low. The gap between saving and the investment in businesses and housing must be filled by an inflow of capital from abroad. That inflow is equal to the difference between what we spend on imports and what we earn from exports. Achieving this trade deficit requires a high value of the dollar. Reducing the trade deficit requires both a higher saving rate and a lower real value of the dollar.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Martin Feldstein,