Impact Of The Lower Dollar And Higher Oil Prices On The US Current Account Balance
In September the author updated the current account projection model from a 2005 base to a 2007 base (Cline 2007, 2005). The dollar has fallen significantly in the two months since those estimates were prepared. In the same period, and perhaps not fully coincidentally, oil prices have surged to nearly $100 per barrel. This paper considers which effect is the more dominant: current account improvement from further dollar correction or current account deterioration from higher oil prices. Oil turns out to be slightly more important, if the price remains high at about $100.