1 / 19

Is There a “Global Saving Glut”? And Is It the Cause of the US Current Account Deficit?

Is There a “Global Saving Glut”? And Is It the Cause of the US Current Account Deficit?. Menzie D.Chinn University of Wisconsin and NBER. Presentation at NABE Panel “International Capital Flows” ASSA, Chicago, January 6, 2007. Anticipating the Answers. Maybe (better investment drought)

talib
Download Presentation

Is There a “Global Saving Glut”? And Is It the Cause of the US Current Account Deficit?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Is There a “Global Saving Glut”?And Is It the Cause of the US Current Account Deficit? Menzie D.Chinn University of Wisconsin and NBER Presentation at NABE Panel “International Capital Flows” ASSA, Chicago, January 6, 2007

  2. Anticipating the Answers • Maybe (better investment drought) • Maybe

  3. Too Obvious a Question? • Long term real rates are low • The U.S. CA deficit seems anomalously large • The East Asian surpluses appear anomalously large

  4. Are Real Long Term Rates and the CA Moving Together? Note: 10 yr const. mat adjusted by Livingstone, Blue Chip, SPF 10 year expected infl.

  5. US Long Term Real Rates Source: St. Louis Fed, Philadelphia Fed

  6. World Real RatesInflation indexed Source: BIS, St. Louis Fed

  7. Is the US Deficit Too Large? • Panel regression approach • 1971-2004, 21 industrial, 97 developing countries (WDI), in five year panels • Include time fixed effects • X are macro variables • Z are financial development, institutional variables (credit; law & order) Source: M.Chinn & H. Ito, “Assaying the World Saving Glut”,http://www.ssc.wisc.edu/~mchinn/CA_Chinn_Ito.pdf

  8. Pooled OLS estimates on 5 year averaged data

  9. Is the US Deficit Too Large? • Short answer: Barely, according to statistical level • Budget deficit is important

  10. US In-Sample Fit

  11. Reality Check Between 2000 and 2005, there was approximately a 4.3 percentage point swing in the US Federal budget balance, and a 2.2 percentage point swing in the U.S. current account balance. This outcome is consistent with a 0.5 coefficient.

  12. Is the E.Asia Surplus Too Large?

  13. NSUS’ REAsia NSEAsia RUS IUS IEAsia NSUS R0 R1 CA1EAsia > 0 CA1US < 0 How Can Low Rates and Imbalances Be Reconciled?

  14. Can Financial Development Rescue the US?

  15. Where Does E. Asia Stand?

  16. Ending Thoughts • Most of the debate has been cast in identities, or simple bivariate relationships • Chinn-Ito quantify the uncertainty surrounding the CA balance relationship • There is something to the saving glut story • But there is also a role for budget deficits • Financial development may or may not help reduce the saving glut

More Related