Global rebalancing with gravity: Measuring the burden of adjustment

Robert Dekle, Jonathan Eaton, Samuel Kortum

Research output: Contribution to journalArticle

70 Scopus citations

Abstract

This paper uses a 42-country model of production and trade to assess the implications of eliminating current account imbalances for relative wages, relative GDPs, real wages, and real absorption. How much relative GDPs need to change depends on flexibility of two forms: factor mobility and adjustment in sourcing of imports, with more flexibility requiring less change. At the extreme, U.S. GDP falls by 30 percent relative to the world's. Because of the pervasiveness of nontraded goods, however, most domestic prices move in parallel with relative GDP, so that changes in real GDP are small.

Original languageEnglish (US)
Pages (from-to)511-540
Number of pages30
JournalIMF Staff Papers
Volume55
Issue number3
DOIs
StatePublished - Jul 2008

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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