US Fiscal Deficits and the Foreign Exchange Value of the US Dollar

  • Robert Z. Aliber
Part of the Studies in Banking and International Finance book series (SBIF)


The popular explanation for the US trade deficits of the early 1980s is that the large US fiscal deficits have led to an increase in interest rates on US bonds; foreign investors then sharply increased their demand for these bonds and the US dollar appreciated sharply and the US trade deficit soared. Thus, the sharp rise in real interest rates since the beginning of the decade is due primarily to the dramatic increase in the level of current and future structural budget deficits’ (Feldstein, 1985).


Interest Rate Monetary Policy Inflation Rate Real Interest Rate Nominal Interest Rate 
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Copyright information

© Donald R. Hodgman and Geoffrey E. Wood 1989

Authors and Affiliations

  • Robert Z. Aliber

There are no affiliations available

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