The Missing Dark Matter in the Wealth of Nations and its Implications for Global Imbalances

49 Pages Posted: 24 Aug 2007

See all articles by Ricardo Hausmann

Ricardo Hausmann

Harvard University - Harvard Kennedy School (HKS)

Federico Sturzenegger

Universidad Torcuato Di Tella; Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Abstract

Current account statistics may not be good indicators of the evolution of a country's net foreign assets and of its external position's sustainability. The value of existing assets may vary independently of current account flows, so-called 'return privileges' may allow some countries to obtain abnormal returns, and mismeasurement of FDI, unreported trade of insurance or liquidity services, and debt relief may also play a role. We analyse the relevant evidence in a large set of countries and periods, and examine measures of net foreign assets obtained by capitalizing the net investment income and then 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 measured by official statistics. We find it to be important for many countries, analyse its relationship with theoretically relevant factors, and note that the resulting perspective tends to make global net asset positions appear relatively stable.

Suggested Citation

Hausmann, Ricardo and Sturzenegger, Federico, The Missing Dark Matter in the Wealth of Nations and its Implications for Global Imbalances. Economic Policy, Vol. 22, No. 51, pp. 469-518, July 2007. Available at SSRN: https://ssrn.com/abstract=1007835 or http://dx.doi.org/10.1111/j.1468-0327.2007.00182.x

Ricardo Hausmann (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
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617-496-3740 (Phone)
617-496-8753 (Fax)

HOME PAGE: http://www.hks.harvard.edu/about/faculty-staff-directory/ricardo-hausmann

Federico Sturzenegger

Universidad Torcuato Di Tella ( email )

Minones 2159
1428 Buenos Aires, 1428
Argentina

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-496-3255 (Phone)
617-496-1722 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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