What are the causes and consequences of the current US account deficit?

Type :

Presentation

Pages :

5 pages

Format :

.doc

Published date :

01/21/2009

Category :

Economics & finance

Sub category :

Economics

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Summary :

Introduction.
The causes of the US current account deficit.
1. The causes from the domestic perspective.
2. The causes from outiside.
The consequences of the US current account deficit.
1. The consequences from international finance's point of view.
2. The consequences from domestic economy point of view.
Conclusion.
References.

Abstract

Few economic issues have recently posed as many problems to authorities and economists than the U.S. current account deficit. It has become an issue that is receiving more and more attention and it is now considered as a "hot topic". Some fear that it represents a time bomb for the global economy. The current account is part of the Balance of Payments and it is the net flow of current transactions, including goods, services, and interest payments between countries. A country's current account is very important because it measures the size and direction of international borrowing. There is a current account deficit when a country imports more goods and services than it exports, or when a country invests less than it saves. The U.S. current account deficit is substantial. In 2005 it exceeded 800 billion dollars, that is to say 6.4 % of the U.S. GDP (Growth Domestic Product). This represents roughly 1.5 % of the world's GDP. This huge deficit is not new. Indeed, there were already advance indications in the 1980s, in particular since domestic spending began to grow faster than the economy in the U.S.