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Global imbalances or bad accounting? The missing dark matter in the wealth of nations

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Author Info
Ricardo Hausmann and Federico Sturzenegger

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Abstract

This paper argues that current account statistics may provide a poor indication for the real evolution of a country’s net foreign assets. The differences may arise due to mismeasurement of FDI, as well as from unreported trade of insurance or liquidity services across countries. We suggest estimating net foreign assets by capitalizing the service flow and estimating the current account from the changes in this stock of foreign assets. We call dark matter the difference between our measure of net foreign assets and that portrayed by official statistics. When apply our estimation to a large set of countries. In particular we find that the US has run no current account deficits over the last two decades, and that global imbalances are relatively small and very stable. The exports of dark matter of the US appear to be fairly steady, casting doubts on the need for a major rebalancing of the global economy.

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Paper provided by Universidad Torcuato Di Tella in its series Business School Working Papers with number globalimbal.

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Length: 50 pages
Date of creation: 2006
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Handle: RePEc:udt:wpbsdt:globalimbal

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The revived Bretton Woods system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 307-313. [Downloadable!]
  2. Matthew Higgins & Thomas Klitgaard & Cedric Tille, 2005. "The income implications of rising U.S. international liabilities," Current Issues in Economics and Finance, Federal Reserve Bank of New York, issue Dec. [Downloadable!]
  3. Lane, Philip & Milesi-Ferretti, Gian Maria, . "External Wealth of Nations," Instructional Stata datasets for econometrics extwealth, Boston College Department of Economics. [Downloadable!]
  4. Caballero, Ricardo & Farhi, Emmanuel & Gourinchas, Pierre-Olivier, 2006. "An Equilibrium Model of 'Global Imbalances' and Low Interest Rates," CEPR Discussion Papers 5573, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Philip Lane & Gian Maria Milesi-Ferretti, 2005. "A Global Perspective on External Positions," The Institute for International Integration Studies Discussion Paper Series iiisdp079, IIIS. [Downloadable!]
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  6. Robert Z. Lawrence, 1990. "U.S. Current Account Adjustment: An Appraisal," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990-2), pages 343-392. [Downloadable!]
  7. Gourinchas, Pierre-Olivier & Jeanne, Olivier, 2003. "The Elusive Gains from International Financial Integration," CEPR Discussion Papers 3902, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. 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. [Downloadable!] (restricted)
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  9. Jiandong Ju & Shang-Jin Wei, 2006. "A Solution to Two Paradoxes of International Capital Flows," NBER Working Papers 12668, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Blanchard, Olivier & Giavazzi, Francesco & Sa, Filipa, 2005. "The US Current Account and the Dollar," CEPR Discussion Papers 4888, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Maurice Obstfeld, 2004. "External Adjustment," NBER Working Papers 10843, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Kugler, Peter & Weder di Mauro, Beatrice, 2004. "International Portfolio Holdings and Swiss Franc Asset Returns," CEPR Discussion Papers 4467, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  13. Ralph Kozlow, 2002. "Valuing the Direct Investment Position in U.S. Economic Accounts," BEA Papers 0016, Bureau of Economic Analysis. [Downloadable!]
  14. Maurice Obstfeld and Kenneth Rogoff., 2000. "Perspectives on OECD Economic Integration: Implications for US Current Account Adjustment," Center for International and Development Economics Research (CIDER) Working Papers C00-116, University of California at Berkeley. [Downloadable!]
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  15. 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. [Downloadable!] (restricted)
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  16. Maurice Obstfeld & Kenneth S. Rogoff, 2005. "Global Current Account Imbalances and Exchange Rate Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(2005-1), pages 67-146. [Downloadable!]
  17. Eichengreen, Barry, 2006. "Global imbalances: The new economy, the dark matter, the savvy investor, and the standard analysis," Journal of Policy Modeling, Elsevier, vol. 28(6), pages 645-652, September. [Downloadable!] (restricted)
  18. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306.
  19. repec:tcd:wpaper:tep16 is not listed on IDEAS
  20. Kugler, Peter & Weder di Mauro, Beatrice, 2005. "Why Are Returns on Swiss Franc Assets So Low? Rare Events May Solve the Puzzle," CEPR Discussion Papers 5181, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  21. Klingen, Christoph & Weder di Mauro, Beatrice & Zettelmeyer, Jeronimo, 2004. "How Private Creditors Fared in Emerging Debt Markets, 1970-2000," CEPR Discussion Papers 4374, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  22. Pierre-Olivier Gourinchas & Olivier Jeanne, 2007. "Capital Flows to Developing Countries: The Allocation Puzzle," NBER Working Papers 13602, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  23. Mankiw, N. Gregory & Zeldes, Stephen P., 1991. "The consumption of stockholders and nonstockholders," Journal of Financial Economics, Elsevier, vol. 29(1), pages 97-112, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kevin Cowan & Sebastián Edwards & Rodrigo Valdés, 2007. "Current Account and External Financing: An Introduction," Working Papers Central Bank of Chile 439, Central Bank of Chile. [Downloadable!]
  2. Faruqee, Hamid & Laxton, Doug & Muir, Dirk & Pesenti, Paolo, 2006. "Would Protectionism Defuse Global Imbalances and Spur Economic Activity? A Scenario Analysis," CEPR Discussion Papers 5993, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Juan Pablo Medina & Anella Munro & Claudio Soto, 2007. "What Drives the Current Account in Commodity Exporting Countries? The Cases of Chile and New Zealand," Working Papers Central Bank of Chile 447, Central Bank of Chile. [Downloadable!]
    Other versions:
  4. Crespo Cuaresma, Jesýs & Slacik, Tomas, 2007. "An "almost-too-late" warning mechanism for currency crises," BOFIT Discussion Papers 4/2007, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
    Other versions:
  5. Christopher M. Meissner & Alan M. Taylor, 2006. "Losing our Marbles in the New Century? The Great Rebalancing in Historical Perspective," NBER Working Papers 12580, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Stephanie E. Curcuru & Tomas Dvorak & Francis E. Warnock, 2007. "The Stability of Large External Imbalances: The Role of Returns Differentials," NBER Working Papers 13074, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Ellen R. McGrattan & Edward C. Prescott, 2008. "Technology Capital and the U.S. Current Account," NBER Working Papers 13983, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Tanweer Akram & Haider A. Khan, 2007. "Dark Matter: Some Reflections on the Current Account Debate," CIRJE F-Series CIRJE-F-470, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  9. 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. [Downloadable!]
  10. Miranda Xafa, 2007. "Global Imbalances and Financial Stability," IMF Working Papers 07/111, International Monetary Fund. [Downloadable!]
  11. Barry Bosworth & Susan M. Collins & Gabriel Chodorow-Reich, 2007. "Returns on FDI: Does the U.S. Really Do Better?," NBER Working Papers 13313, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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