# Tag Info

5

You seem to have it the wrong way around. The act of country A extending Most Favoured Nation status to country B only affects the import tariffs on country B's products, not those on other countries' products. MFN status means that the tariffs on the Most Favoured Nation's products cannot be higher than the lowest import tariff on similar products from ...

4

They are very related concepts but they are not completely same. Current account deficit occurs when country spends more on imports than it receives in imports. Trade deficit means that more imports are being sold than exports by a country. A trade deficit is also a part of current account deficit as current account can be decomposed as: $$CA=X-M+NI+NT$$ ...

3

Table 2.2 of https://www.bea.gov/scb/pdf/2017/10-October/1017-international-services-tables.pdf suggests US exports of services to China in 2016 worth $\$54$bn and US imports of services from China in 2016 worth$\$16$bn Later parts of table 2.2 give a breakdown of types of services. Travel (for all purposes including education) - which should not ...

3

That depends on your model of the world, and on how you define "goods and services". In a gold standard world, you essentially exchange goods and services with gold. Gold mining is therefore simply an expansion of the money supply. Adding gold to both the nominal and real side of the economy seems to me like today adding money as a good to GDP. If you do ...

3

This depends on the exchange rate regime. For a floating exchange rate, the balance of payments is always in equilibrium, that is, the financial account always offsets the current (and capital) account. A hypothetical deficit is avoided by a depreciating exchange rate, a hypothetical surplus is avoided by appreciation. For a fixed exchange rate regime, the ...

3

You're doing the traditional mistake of people not familiar with Econometrics: You mistake correlation and causality. You look at a change in the USD, assume it to be exogenous, and then predict an impact onto the S&P. However, changes in the USD are not exogenous. For example, an increase in US productivity (compared to the productivity of firms in ...

3

This is an excellent question and I will do my best to give you a well thought out answer. Many observers believe the U.S. dollar (USD) will lose its status as the world's reserve currency. In fact, I got pushback from another forum regarding finance about this. These doomsday dollar folks cite agreements between China and Iran on settling trade in their ...

3

Often a good answer consist the most of shedding light on some aspects of the terms of the question itself. I hope a couple of remarks could be useful. About causality, the fact is that current deficit implies reserves exit from USA, which only can be supported by reserves entering, otherwise resulting in a diminishing stock of reserves, eventually ...

3

Since we are not trading with aliens (yet), you are right in assuming the global account balance ought to be zero. Your data contradicts this because it is collected by numerous statistical agencies who differ in their capability and their methods. Examples for different outcomes could arise from: different degrees of border control. The fact that an export ...

2

The data you're asking for doesn't exist. Most data on things like this are captured through the taxing authority, which means that there are entities that want to collect taxes and therefore care very much where you do something and where your inputs came from. That's very true when there are international borders involved, and it's true to a much lesser ...

2

The physical part of trade in goods and services is recorded in the Current Account and the payment (with financial assets) part of the transaction is recorded in the Financial Account. The Balance of Payments should be 0 after you sum up the Current Account balance, the Capital Account and the Financial Account balances. The trade in goods and services is ...

2

I consider the very rapid growth of infrastructure in the BRIC countries to be a strong driver of the high oil prices (as well as other building commodities) in the mid-2000s. It takes a lot of energy to build roads, mine copper and iron, make cement, etc... I would disagree with two of the implications in the statement: "in the 2000's we witnessed the ...

2

As requested in comments: German banks lost a lot of money in the US sub-prime crisis and would have lost a lot more in Greece if the Eurosystem had not saved them. This is what might reasonably be expected if you run persistent trade surpluses: you gain foreign assets which may never be repaid or may be less valuable than you expected The European ...

2

The economics of trade can broadly be divided into two parts. There is a microeconomic part concerned with patterns of trade in particular kinds of goods, their causes such as factor endowments and costs, and effects on welfare, key concepts being comparative advantage and the gains from trade. Then there is a macroeconomic part concerned with overall ...

2

Here is a reference by Feldstein, Krugman that is often quoted when discussing the FX neutrality of border tax adjustments: http://www.nber.org/chapters/c7211.pdf Another useful reference that takes a somewhat skeptical view and lists more references is http://voxeu.org/article/exchange-rate-implications-border-tax-adjustment-neutrality. All models ...

2

You get cheaper access to inputs. For a large advanced economy that is relatively diversified, it is possible that unilateral tariff reductions across many or all sectors can be good for the economy by freeing up resources presently occupied in low-value activities with few prospects to contribute to technological progress. The additional ease of doing ...

2

In general, no, it can't impose stricter rules on imports than it does on domestic production. Or more accurately, it could, but the countries exporting fur to Norway could challenge this. The guiding rule is that domestic industry cannot receive preferential treatment over importers. Norway can do it the other way around - that is to say, WTO rules would ...

2

To answer the question, I feel it is needed to correct one misunderstanding first: trade deficit does not mean the government buys imported products more than it sells the exported products. Rather, it means the imported products are more than exported products, which does not indicate whether the products are consumed or invested by the government or the ...

2

1- Some basic macroeconomic fundamentals I highly doubt a trade imbalance is causing high inflation. The trade deficit is likely happening because of economists call "Twin Deficits". I'll spare you the accounting that leads to this equation and present you a setorial balances identity. Let $S$ be private savings, $I$ be capital formation, $G$ be government ...

2

This can be visualized nicely by an example: Let’s say there are two islands in the world. And let’s just say island A only produces apples and island B only produces bananas. Also, the (real) exchange rate is one apple for one banana. Now, for whatever reason, island A exports 20 apples but imports 30 bananas (a trade deficit). It now owes goods of the ...

2

To complement @1muflon1's answer (+1). Here are some definitions from the Deardorffs' Glossary of International Economics, a very reliable source of information. Trade deficit is simply defined as "Imports minus exports of goods and services." Regarding current account deficit. Let's first define the current account which includes trade: A country's ...

2

Premises of your Q are simply false: If a country has a positive savings rate, that means that more money had to come into the country from somewhere outside of the country. This is completely incorrect. Total savings of a country is sum of private and public saving. For an open economy output is given by $Y=C+I+G+X-M$ (where $Y$ is output $C$ consumption $... 2 I think this boils down to misunderstanding what saving in macroeconomics is. Saving does not cancel each other out. In closed economy, private saving is difference between income (which is by definition equivalent to output so I will be using output and income interchangeably) and consumption$S=Y-C\$ and public saving is difference between government ...

2

Ignoring net errors and omissions and the official reserve account, it is indeed just the current account and capital account and the BoP always balances. However, under floating FX rates, the exchange rate is largely determined by supply and demand in the FX market. A country borrows internationally if a current account deficit is financed by a capital ...

1

I believe that the UN Comtrade database is the main data source for this kind of query with substantial country coverage. It's broken down by HS code. It has its issues. Reporting is based on national authorities, so you should usually expect data on imports to be more accurate than exports because of the tax implications (so Uganda's imports from Kenya ...

1

Considering that modern economies rarely experience recessions due to supply shocks (such as spiking oil prices), we should look at this from the perspective of a demand shock, a decrease in spending. This should not have too significant of an impact on the supply of exports. The supply for these depends on foreign demand, theoretically unaffected by the ...

1

It could be a sustainable economic policy. It depends. Assuming your government doesn't have a big budget surplus, it will have to replace revenue lost from tariffs -- i.e. raise other taxes. Most taxes are distortionary, i.e. discourage productive economic behaviour. Especially for less developed countries and countries with weaker international ...

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