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The income implications of rising U.S. international liabilities

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Author Info

  • Matthew Higgins
  • Thomas Klitgaard
  • Cedric Tille

Abstract

Although the United States has seen its net liabilities surge in recent years, its investment income balance has remained positive-largely because U.S. firms operating abroad earn a higher rate of return than do foreign firms operating here. The continuing buildup in liabilities, however, should soon push the U.S. income balance below zero. In that event, net income flows will begin to boost the nation's current account deficit instead of reducing it.

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Bibliographic Info

Article provided by Federal Reserve Bank of New York in its journal Current Issues in Economics and Finance.

Volume (Year): 11 (2005)
Issue (Month): Dec ()
Pages:

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Handle: RePEc:fip:fednci:y:2005:i:dec:n:v.11no.12

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Keywords: Liabilities (Accounting) ; Balance of payments;

References

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  1. Matthew Higgins & Thomas Klitgaard, 1998. "Viewing the current account deficit as a capital inflow," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 4(Dec).
  2. Philip R. Lane & G.M. Milesi-Ferretti, 2003. "International Financial Integration," Trinity Economics Papers 20031, Trinity College Dublin, Department of Economics.
  3. Gourinchas, Pierre-Olivier & Rey, Hélène, 2005. "From World Banker to World Venture Capitalist: US External Adjustment and The Exorbitant Privilege," CEPR Discussion Papers 5220, C.E.P.R. Discussion Papers.
  4. Cedric Tille, 2003. "The impact of exchange rate movements on U.S. foreign debt," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Jan).
  5. Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2004. "The performance of international portfolios," International Finance Discussion Papers 817, Board of Governors of the Federal Reserve System (U.S.).
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Citations

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Cited by:
  1. Benjamin Eden, 2007. "International Seigniorage Payments," 2007 Meeting Papers 54, Society for Economic Dynamics.
  2. Meissner, Christopher M & Taylor, Alan M, 2006. "Losing our Marbles in the New Century? The Great Rebalancing in Historical Perspective," CEPR Discussion Papers 5917, C.E.P.R. Discussion Papers.
  3. Pierpaolo Benigno, 2006. "Are Valuation Effects Desirable from a Global Perspective?," NBER Working Papers 12219, National Bureau of Economic Research, Inc.
  4. Michele Cavallo & Cédric Tille, 2006. "Could capital gains smooth a current account rebalancing?," Working Paper Series 2006-03, Federal Reserve Bank of San Francisco.
  5. Martin Evans, 2012. "International Capital Flows and Debt Dynamics," Working Papers gueconwpa~12-12-04, Georgetown University, Department of Economics.
  6. Jane Ihrig & Jaime Marquez, 2006. "Modeling direct investment valuation adjustments and estimating quarterly positions," International Finance Discussion Papers 857, Board of Governors of the Federal Reserve System (U.S.).
  7. Dr. Ioannis N. Kallianiotis & Dr. Dean Frear, 2006. "Assets Return and Risk and Exchange Rate Trends: An Ex Post Analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(3-4), pages 15-34.
  8. Luigi Bonatti & Andrea Fracasso, 2009. "The evolution of the Sino-American Co-dependency: modelling a regime switch in a growth setting," Department of Economics Working Papers 0905, Department of Economics, University of Trento, Italia.
  9. Habib, Maurizio Michael, 2010. "Excess returns on net foreign assets: the exorbitant privilege from a global perspective," Working Paper Series 1158, European Central Bank.
  10. Ricardo Hausmann and Federico Sturzenegger, 2006. "Global imbalances or bad accounting? The missing dark matter in the wealth of nations," Business School Working Papers globalimbal, Universidad Torcuato Di Tella.
  11. Alexandra Heath, 2007. "What explains the US net income balance?," BIS Working Papers 223, Bank for International Settlements.
  12. Hickey, Ronan, 2007. "How Sustainable are Global Imbalances?," Quarterly Bulletin Articles, Central Bank of Ireland, pages 85-119, October.
  13. Nicolas Stoffels & Cédric Tille, 2007. "Why are Switzerland's foreign assets so low? The growing financial exposure of a small open economy," Staff Reports 283, Federal Reserve Bank of New York.
  14. Matthew Higgins & Thomas Klitgaard & Cédric Tille, 2006. "Borrowing without debt? Understanding the U.S. international investment position," Staff Reports 271, Federal Reserve Bank of New York.
  15. Karel Brůna, 2011. "An Analysis of Costs and Revenues of Net Foreign Investment Position in Advanced and Transitive Countries," Český finanční a účetní časopis, University of Economics, Prague, vol. 2011(3), pages 22-31.
  16. Takeuchi, Fumihide, 2010. "US external debt sustainability revisited: Bayesian analysis of extended Markov switching unit root test," Japan and the World Economy, Elsevier, vol. 22(2), pages 98-106, March.
  17. Carol C. Bertaut & Steven B. Kamin & Charles P. Thomas, 2008. "How long can the unsustainable U.S. current account deficit be sustained?," International Finance Discussion Papers 935, Board of Governors of the Federal Reserve System (U.S.).

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