|
|
| |
Current issue: Issue 51, July 2007 |
|
|
| Will there be a dollar crisis? |
|
|
Paul Krugman
|
|
Abstract:
|
Almost everyone believes that the US current account deficit must eventually end, and that this end will involve dollar depreciation. However, many believe that this depreciation will take place gradually. This paper shows that any process of gradual dollar decline fast enough to prevent the accumulation of implausible levels of US external debt would impose capital losses on investors much larger than they currently expect. As a result, there will at some point have to be a 'Wile E. Coyote moment'– a point at which expectations are revised, and the dollar drops sharply. It is much less clear, however, whether this 'crisis' will produce macroeconomic problems.— Paul Krugman
|
| |
|
Page Range: 435 - 467; Article Type: OA; 2 tables ; 33 pages
|
|
SUBSCRIBE TO THE JOURNAL TO ACCESS THE FULL TEXT OF ARTICLES ONLINE
|
|
* The online system will automatically recognize if your institution is a subscriber to Economic Policy. If so, you will be able to download this article, even without having to Logon
|
|
|
|
|
|
