On the Behaviour of U.S. Foreign Capital Balances: A Review of the Recent Literature

40 Pages Posted: 5 Mar 2009

Date Written: April 1, 2007

Abstract

The U.S. having run large current account deficits for more than two decades, it should exhibit larger than reported net foreign liabilities and net income payments. These outcomes can be explained by the fact that the U.S. has enjoyed better returns on its gross external assets than it has paid on its gross liabilities. Several theories have been put forward to provide a rationalization: better investing skills or business know-how, a privileged position in the world economy, and failures in national accounting methods to provide accurate views on current account balances and net external positions.

This paper tries to provide a review of the recent literature concerning these issues: theories, critiques, and implications for the future trajectories of the dollar and U.S. net foreign assets.

Keywords: U.S. Net International Investment Position, Net Foreign Debt, Dark Matter, Exhorbitant Privilege

Suggested Citation

Kahan, Raphael, On the Behaviour of U.S. Foreign Capital Balances: A Review of the Recent Literature (April 1, 2007). Available at SSRN: https://ssrn.com/abstract=1353490 or http://dx.doi.org/10.2139/ssrn.1353490

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