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the Rise of Creditor Nations

Author

Listed:
  • Konstantin Kucheryavyy

    (CUNY Baruch College)

  • Alexander Monge-Naranjo

    (FRB Atlanta, Emory University, and CEPR)

  • Kenichi Ueda

    (The University of Tokyo, CEPR and TCER)

Abstract

Major industrialization episodes—from nineteenth-century Britain to Germany, the United States, Japan, Korea, and China—were followed by persistent current account surpluses and large accumulations of external wealth, a pattern at odds with standard current-account models. We develop a model of the transition dynamics of an emerging economy that explains this behavior. Two financial frictions are central: a gold-in-advance constraint requiring hard-currency settlement of debt service and consumption imports, and a pledgeability constraint linking foreign borrowing to capital-goods imports. These frictions generate an endogenous transition from net debtor to persistent net creditor during industrialization. Doing so, the framework resolves the Lucas Paradox and reproduces the falling-then-rising external-wealth dynamics observed across industrialization episodes since 1845, which are key for understanding the observed global imbalances.

Suggested Citation

  • Konstantin Kucheryavyy & Alexander Monge-Naranjo & Kenichi Ueda, 2026. "the Rise of Creditor Nations," CARF F-Series CARF-F-628, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf628
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    References listed on IDEAS

    as
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