Rather, the U.S. trade balance is the tail of the dog; for the most part, it has been passively determined by foreign and domestic incomes, asset prices, interest rates, and exchange rates, which are themselves the products of more fundamental driving forces. Instead, an alternative perspective on the current account appears likely to be more useful for explaining recent developments.
Many of them have moved towards sustainable exchange rate regimes and prudent debt and reserve management policies. Against this backdrop of slowing world economic activity, the Reserve Bank’s composite leading business cycle indicator regained some momentum in the three months ending February. Similarly the composite coincident business cycle indicator was on a definite upward trend from May 2000 to February 2001.