The narrowing of the risk premium on dollar assets appears to explain a bit less of the widening of the trade deficit, with the loosening of fiscal policy and reduction of private saving making still-smaller  7  10  The contributions to the trade deficit shown in figure 6 do not precisely match those shown in figures 1 through 5 because of the non-linearity of the model.
BIS Review 27/2005  contributions. Of course, these results are the product of our model-based analysis, with all of the strengths and weaknesses that model simulations entail; it would be useful to complement these findings with more direct historical and empirical analysis of the U.S. external imbalance.