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Dark Matter: Some Reflections on the Current Account Debate


  • Tanweer Akram

    (ING Investment Management)

  • Haider A. Khan

    (GSIS , University of Denver)


The United States has a large and persistent current account deficit. Yet, U.S.'s income receipts from the rest of the world have exceeded its income payments to the rest of the world for many years. This appears to be paradoxical because for a country with a negative net foreign assets position, such as the U.S., international income payments to the rest of the world are likely to exceed its international income receipts. Hausmann and Sturzenegger (2005) offer an explanation of this apparent paradox. They argue that U.S. current account statistics do not properly measure U.S.'s net foreign assets position and that its actual net foreign assets position is measurably better than the officially estimated position primarily due to the existence of intangible corporate capital invested overseas. In their view the debate about the sustainability of the U.S. current account deficit and the negative net foreign assets position is moot because these deficits and debts are either non-existent or fairly small. This paper critically evaluates Hausmann et al's claims and examines the implications of their hypothesis. It offers, within an analytical framework, alternative explanations that are more consistent with the stylized facts.

Suggested Citation

  • 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.
  • Handle: RePEc:tky:fseres:2007cf470

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    References listed on IDEAS

    1. Bekker, Paul A, 1994. "Alternative Approximations to the Distributions of Instrumental Variable Estimators," Econometrica, Econometric Society, vol. 62(3), pages 657-681, May.
    2. Theodore W. Anderson & Naoto Kunijtomo & Yukitoshi Matsushita, 2005. "A New Light from Old Wisdoms : Alternative Estimation Methods of Simultaneous Equations and Microeconometric Models," CIRJE F-Series CIRJE-F-321, CIRJE, Faculty of Economics, University of Tokyo.
    3. Naoto Kunitomo & Yukitoshi Matsushita, 2003. "On Finite Sample Distributions of the Empirical Likelihood Estimator and the GMM Estimator," CIRJE F-Series CIRJE-F-200, CIRJE, Faculty of Economics, University of Tokyo.
    4. Morimune, Kimio, 1989. "Test in a Structural Equation," Econometrica, Econometric Society, vol. 57(6), pages 1341-1360, November.
    5. Naoto Kunitomo & Yukitoshi Matsushita, 2003. "Asymptotic Expansions of the Distributions of Semi-Parametric Estimators in a Linear Simultaneous Equations System," CIRJE F-Series CIRJE-F-237, CIRJE, Faculty of Economics, University of Tokyo.
    6. Frank Kleibergen, 2005. "Testing Parameters in GMM Without Assuming that They Are Identified," Econometrica, Econometric Society, vol. 73(4), pages 1103-1123, July.
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