How Long Can The Unsustainable U.S. Current Account Deficit Be Sustained?
This paper addresses three questions about the prospects for the U.S. current account deficit. Is it sustainable in the long term? If not, how long will it take for measures of external debt and debt service to reach levels that could prompt some pullback by global investors? And if and when such levels are breached, how readily would asset prices respond and the current account start to narrow? To address these questions, the authors start with projections of a detailed partial-equilibrium model of the U.S. balance of payments.