On current account surpluses and the correction of global imbalances
The United States has run an increasingly large current account deficit over the last few years. J. P. Morgan forecasts that in 2007 the deficit will reach almost one trillion dollars, or 7 percent of GDP. This unprecedented situation has generated concern among analysts and policymakers. Many argue that this deficit is unsustainable and that, at some point, it will have to decline. Much of the recent research on the issue examines whether the U.S. external adjustment will be gradual or abrupt, and how it will affect the (real) value of the dollar.