This paper begins by reviewing the current U.S. fiscal situation and the causes of its recent deterioration. As a guide to possible policy actions, it estimates past responses of revenue and expenditure both at the federal and at the state and local level. Federal fiscal policy is found to be...

We develop a three-region economic model to assess how a significant reduction in global current account imbalances might impact dollar, euro, and Asian real exchange rates under alternative scenarios. Sizable exchange rate shifts appear to be a necessary corollary of adjustment even under...