Exchange rates and trade deficits
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Exchange rates and trade deficits

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Published by Congressional Research Service, Library of Congress in [Washington, D.C.] .
Written in English


  • Foreign exchange -- United States,
  • Balance of trade -- United States,
  • International finance

Book details:

Edition Notes

StatementArlene Wilson
SeriesMajor studies and issue briefs of the Congressional Research Service -- 1992, reel 4, fr. 00687
ContributionsLibrary of Congress. Congressional Research Service
The Physical Object
Pagination6 p.
ID Numbers
Open LibraryOL15459654M

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  As long as the US has a savings deficit, even if its imports from China equal zero, it will continue to run a trade deficit. China’s trade surplus with the US will then be transferred to other countries. References. Bank for International Settlements (BIS), () Real Broad Effective Exchange Rate for China© [RBCNBIS], retrieved from FRED. Real Effective Exchange Rates and Export Adjustment in the U.S By Sukar, Abdulhamid Quarterly Journal of Business and Economics, Vol. 37, No. 1, Winter Read preview Overview. Untangling the Trade Deficit By Taylor, Timothy The Public Interest, No. , Winter Read preview Overview. A deficit is usually the result of an increasing net trade deficit where the value of imports exceeds the value of exports i.e. M>X. As a result, there will be a net outflow of money from a country’s circular flow. Households and businesses pay for imports in their own currency, but this is eventually converted into the currency of the.   Trade deficits and surpluses are sometimes attributed to intentionally low or high exchange rate levels. The impact of exchange rate levels on trade has been much debated but the large body of existing empirical literature does not suggest an unequivocally clear picture of the trade impacts of changes in exchange rates.

  The United States has a few key trading partners such as Canada, Mexico, and Japan. If we look at the exchange rates between the United States and these countries, perhaps we will have a better idea of why the United States continues to have a large trade deficit despite a rapidly declining dollar. We examine American trade with four major trading partners and see if those trading. At the original equilibrium (E 0), where the demand for U.S. dollars (D 0) intersects with the supply of U.S. dollars (S 0) on the foreign exchange market, the exchange rate is euros per U.S. dollar and the equilibrium quantity traded in the market is $ billion per day (which was roughly the quantity of dollar–euro trading in exchange rate markets in the mids). Then the U.S. budget deficit rises and foreign financial investment provides the source of funds for that budget deficit. The retail exchange market. Currency for international travel and cross-border payments is predominantly purchased from banks, foreign exchange brokerages and various forms of bureaux de retail outlets source currency from the interbank markets, which are valued by the Bank for International Settlements at US$ trillion per day. The purchase is made at the spot contract rate. These figures are calculated on an exchange rate basis." The top ten on their list of countries by current account balance in were: Germany: $,,,; China: $,,,; Netherlands: $90,,,; South Korea: $89,,,; Saudi Arabia: $76,,,; Taiwan: $65,,,; Russia: $59,,,; Singapore: $58,,,

Saigon Economist Times, 03/3. Trinh, B, Kobayashi, K & Vu, D , Economic integration and trade deficit: A case of Vietnam, ournal of Economics and International Finance Vol. 3 (13), pp. Qiao, H , “Exchange Rate and Trade Balance under the Dollar Standard”, Journal of Policy Modeling Vol Issue 5, pp. Thus, trade deficits can be sustainable for a very long time, making the short run relationship between trade deficits and the dollar very tenuous. To conclude, in the long run, trade deficits may be expected to contribute to a weaker dollar, as the economy adjusts to .   A weak or strong currency can contribute to a nation's trade deficit or trade surplus over time. For example, assume you are a U.S. exporter who . Movements in the exchange rate help explain the link between spending and the trade deficit. As spending in the United States increases, the Federal Reserve will need to raise interest rates to keep inflation in check. Higher interest rates attract capital inflows from abroad, causing the dollar to appreciate. A stronger dollar makes our.