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Where Did All The Borrowing Go? A Forensic Analysis of the U.S. External Position

  • Lane, Philip R.
  • Milesi-Ferretti, Gian Maria

The deterioration in the U.S. net external position in recent years has been much smaller than the extensive net borrowing associated with large current account deficits would have suggested. This paper examines the sources of discrepancies between net borrowing and accumulation of net liabilities for the U.S. economy over the past 25 years. In particular, it highlights and quantifies the role played by net capital gains on the U.S. external portfolio and ‘residual adjustments’ in explaining this discrepancy. It discusses whether these ‘residual adjustments’ are likely to be originating from measurement errors in external assets and liabilities, financial flows, or capital gains, and explores the implications of these conjectures for the U.S. financial account and external position.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6655.

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Date of creation: Jan 2008
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Handle: RePEc:cpr:ceprdp:6655
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  1. Matthew Higgins & Thomas Klitgaard & C�dric Tille, 2007. "Borrowing Without Debt? Understanding the U.S. International Investment Position," Business Economics, Palgrave Macmillan, vol. 42(1), pages 17-27, January.
  2. Michele Cavallo & Cedric Tille, 2006. "Could capital gains smooth a current account rebalancing?," Staff Reports 237, Federal Reserve Bank of New York.
  3. Pierre-Olivier Gourinchas & Hélène Rey, 2007. "From World Banker to World Venture Capitalist: U.S. External Adjustment and the Exorbitant Privilege," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 11-66 National Bureau of Economic Research, Inc.
  4. Tille, Cédric & van Wincoop, Eric, 2010. "International capital flows," Journal of International Economics, Elsevier, vol. 80(2), pages 157-175, March.
  5. Gian-Maria Milesi-Ferretti & Philip R. Lane, 1999. "The External Wealth of Nations; Measures of Foreign Assets and Liabilities for Industrial and Developing Countries," IMF Working Papers 99/115, International Monetary Fund.
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  14. William R. Cline, 2005. "United States as a Debtor Nation, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3993, December.
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  17. Philip R. Lane & G Milesi-Feretti, 2004. "Financial Globalization and Exchange Rates," CEP Discussion Papers dp0662, Centre for Economic Performance, LSE.
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  19. Hausmann, Ricardo & Sturzenegger, Federico, 2006. "Global Imbalances or Bad Accounting? The Missing Dark Matter in the Wealth of Nations," Working Paper Series rwp06-003, Harvard University, John F. Kennedy School of Government.
  20. Patrick McGuire & Nikola Tarashev, 2006. "Tracking international bank flows," BIS Quarterly Review, Bank for International Settlements, December.
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  22. Patrick McGuire, 2004. "A shift in London's eurodollar market," BIS Quarterly Review, Bank for International Settlements, September.
  23. Stephanie E. Curcuru & Tomas Dvorak & Francis E. Warnock, 2007. "The stability of large external imbalances: the role of returns differentials," International Finance Discussion Papers 894, Board of Governors of the Federal Reserve System (U.S.).
  24. 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.
  25. Guy Meredith, 2007. "Debt Dynamics and Global Imbalances; Some Conventional Views Reconsidered," IMF Working Papers 07/4, International Monetary Fund.
  26. Stephanie E. Curcuru & Charles P. Thomas & Francis E. Warnock, 2008. "Current Account Sustainability and Relative Reliability," NBER Working Papers 14295, National Bureau of Economic Research, Inc.
  27. 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.
  28. William L. Griever & Gary A. Lee & Francis E. Warnock, 2001. "The U.S. system for measuring cross-border investment in securities: a primer with a discussion of recent developments," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 634-650.
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