Global rebalancing with gravity: Measuring the burden of adjustment

Robert Dekle, Jonathan W. Eaton, Samuel Kortum

Research output: Contribution to journalArticle

62 Citations (Scopus)

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 1 2008

Fingerprint

Gravity
Rebalancing
Burden
Sourcing
Relative wages
Real GDP
Current account imbalances
Factor mobility
Import
Real wages

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Dekle, Robert ; Eaton, Jonathan W. ; Kortum, Samuel. / Global rebalancing with gravity : Measuring the burden of adjustment. In: IMF Staff Papers. 2008 ; Vol. 55, No. 3. pp. 511-540.
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Global rebalancing with gravity : Measuring the burden of adjustment. / Dekle, Robert; Eaton, Jonathan W.; Kortum, Samuel.

In: IMF Staff Papers, Vol. 55, No. 3, 01.07.2008, p. 511-540.

Research output: Contribution to journalArticle

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