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Balance of Payments - Dynamics
Capital Account & Current Account linked
- If one increases, the other will also, & vice-versa
- Causality not clear
U.S. Issues
- Large, persistent (30+yrs):
- Current account deficit
- Capital account surplus
- Unusual for developed nation
- Possible factors:
- Low U.S. savings rate
- High U.S. consumption & govt spending
- Strong dollar
- $ as reserve currency
- Petro-dollars
- Weak yen & yuan as foreign growth strategy