Viewing the Current Account Deficit as a Capital Inflow

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Current Issues in Economics and Finance

Viewing the Current Account Deficit as a Capital Inflow

December 1998 Volume 4 Number 13

JEL classification: F32, F41, F14

Authors: Matthew Higgins and Thomas Klitgaard

With the 1998 current account deficit approaching $225 billion, attention is again focusing on the deficit's impact on U.S. jobs. Although a high deficit does adversely affect employment in export- and import-competing industries, it also means that considerable foreign capital is flowing into the United States, supporting domestic investment spending that stimulates growth and creates jobs.

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