The US deficit and the weak dollar puzzle
A paper from the International Monetary Fund investigates how the US current account deficit could remain large despite the depreciation of the dollar.
The author finds that, due to the composition of its external portfolio, the US enjoys a favourable rate of return differential between its external assets and liabilities. This implies that the adjustment in the balance of goods and services needed for a stabilised US external position is smaller than would otherwise be the case.
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