Sources of Macroeconomic Imbalances in the World Economy: a Simulation Approach

81 Pages Posted: 26 Mar 2007

See all articles by Nouriel Roubini

Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Nouriel Roubini

affiliation not provided to SSRN

Date Written: August 1987

Abstract

This paper uses a global macroeconomic simulation model to identify the factors that have contributed to global trade and financial imbalances in the 1980s. After investigating the properties of monetary and fiscal policies in the model, we examine whether the budgetary shifts in the OECD economies in the 1980s can account for the bulk of trade and exchange rate movements. Our conclusions are mixed. The combination of sharply higher fiscal deficits in the United States and sharply reduced deficits in Japan goes far to explain the movements of the trade balances and exchange rates of the two economies. However, the drop in the dollar vis-a-vis the Yen since late 1985 is not well explained by the model. We also investigate the prospects for a reduction of the U.S. trade deficits if U.S. budget deficits are in fact reduced, as well as the possible role for Japanese monetary and fiscal policies in reducing the trade imbalances of the two countries.

Suggested Citation

Roubini, Nouriel and Roubini, Nouriel, Sources of Macroeconomic Imbalances in the World Economy: a Simulation Approach (August 1987). NBER Working Paper No. w2339. Available at SSRN: https://ssrn.com/abstract=976155

Nouriel Roubini

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0886 (Phone)
212-995-4218 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nouriel Roubini

affiliation not provided to SSRN

No Address Available

Register to save articles to
your library

Register

Paper statistics

Downloads
27
Abstract Views
328
PlumX Metrics