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

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.