The Challenges of Narrowing the US Current Account Deficit and Implications for Other Economies This article uses the OECD’s interlink model to explore several possible channels through which a narrowing of the US current account deficit could occur. The shocks considered include dollar depreciation fiscal consolidation and an improvement in the non price competitiveness of US producers. A key conclusion is that shocks would have to be very large in order to materially reduce the US external deficit largely because of the offsetting impact of second round effects. In addition...