Macroeconomic Policies to Reduce the Current-Account Deficit: Technical Background
CONGRESSIONAL BUDGET OFFICE (U S CONGRESS) WASHINGTON DC
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With the sharp increase in the U.S. current-account deficit during the 1980s, the relative effectiveness of alternative policies to reduce that deficit has come to the fore in public policy discussions. Policymakers and analysts are discussing actively whether to go about reducing the deficit through trade policy measures, closer international coordination of monetary and fiscal policies, or some combination of these measures. This paper and an accompanying Congressional Budget Office study add quantitative estimates to this discussion by reporting simulations of several alternative policy measures using an international econometric model. The purpose of this paper is to provide technical background on the model and its properties. The main policy simulations and their interpretation are described in the other study.
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