Brad Setser on Addressing the Global Dollar Shortage and COVID-19’s Implications for Worldwide Trade Imbalances
Macro Musings with David Beckworth
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What if COVID-19 Continues Longer Than We Thought?
The immediate effect of COVID-19 is a contraction in trade. It's not a shift in the pattern of imbalances. So it is quite possible that surpluses and deficits on both sides will shrink simply because there's less trade. But then you start trying to think through the effect of having different components of trade shrink at different paces. We don't know how persistent the dollar's strength is going to be. Right now, I think it's a little early to try to forecast how those pressures are going to play out. The impact of tourism and commodity shocks has some predictable effects right now. A lot of oil exporting economies are on track to go into earth account deficits
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