Title

US Fiscal Stimulus Disproportionately Increased Imports and Trade Deficit; Expect the Reverse with Austerity

Document Type

Article

Publication Date

7-26-2011

Abstract

The US fiscal stimulus led to increased imports and slowed the growth of exports. A reduction in the government deficit would likely lead to a devaluation of the dollar, reduce the trade deficit, and increase America's output of exports. Thus, devaluation should be seen as a positive because it would revive American's export market and increase the US' net wealth, especially since foreign assets tend to be denominated in foreign currencies while liabilities are denominated in dollars.

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This article was published in Economists' Forum on July 26, 2011. This blog requires free registration.

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Economists' Forum