The Effect of the US Current Account Deficit on the Dollar Exchange Rate
SIMOLA, TOMI (2008)
Tässä tietueessa ei ole kokotekstiä saatavilla Treposta, ainoastaan metadata.
SIMOLA, TOMI
2008
Kansantaloustiede - Economics
Kauppa- ja hallintotieteiden tiedekunta - Faculty of Economics and Administration
Hyväksymispäivämäärä
2008-05-05Tiivistelmä
The US current account deficit has received much attention in the media. Several economists have expressed their views of the situation and its outcomes. First, almost all scholars agreed that the United States current account position was unsustainable but as time passed and the deficit grew, some argued that the deficit could last a very long time.
It has been difficult to address exchange rate movements with macroeconomic fundamentals in the short run. No model has been able to surpass a random walk model in the short-term. Although it has been hard to explain exchange rate movements with fundamentals, the current account has a role in determining exchange rate changes.
The objective of this work is to examine the effect of the US current account deficit on the dollar exchange rate. The basics of current account behavior are introduced and the fundamentals behind exchange rates are presented. Models by Obstfeld-Rogoff, Engel-Rogers, and Dooley- Folkerts-Landau-Garber are examined in detail in order to unveil the future dollar exchange movements due to the US current account deficit.
International economics, current account, exchange rates
It has been difficult to address exchange rate movements with macroeconomic fundamentals in the short run. No model has been able to surpass a random walk model in the short-term. Although it has been hard to explain exchange rate movements with fundamentals, the current account has a role in determining exchange rate changes.
The objective of this work is to examine the effect of the US current account deficit on the dollar exchange rate. The basics of current account behavior are introduced and the fundamentals behind exchange rates are presented. Models by Obstfeld-Rogoff, Engel-Rogers, and Dooley- Folkerts-Landau-Garber are examined in detail in order to unveil the future dollar exchange movements due to the US current account deficit.
International economics, current account, exchange rates