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Exorbitant Privilege and Exorbitant Duty

  • Pierre-Olivier Gourinchas

    (Associate Professor, Univeresity of California, Berkeley (

  • Helene Rey

    (Professor, London Business School)

  • Nicolas Govillot

    (Ecole des Mines)

We update and improve the Gourinchas and Rey (2007a) dataset of the historical evolution of US external assets and liabilities at market value since 1952 to include the recent crisis period. We find strong evidence of a sizeable excess return of gross assets over gross liabilities. The center country of the International Monetary System enjoys an gexorbitant privilegeh that significantly weakens its external constraint. In exchange for this gexorbitant privilegeh we document that the US provides insurance to the rest of the world, especially in times of global stress. This gexorbitant dutyh is the other side of the coin. During the 2007-2009 global financial crisis, payments from the US to the rest of the world amounted to 19 percent of US GDP. We present a stylized model that accounts for these facts.

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Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 10-E-20.

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Date of creation: Aug 2010
Date of revision:
Handle: RePEc:ime:imedps:10-e-20
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  1. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  2. Hassan, Tarek, 2012. "Country Size, Currency Unions, and International Asset Returns," CEPR Discussion Papers 8991, C.E.P.R. Discussion Papers.
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