Financial Globalization and the U.S. Current Account Deficit

7 Pages Posted: 3 Jan 2008

See all articles by Matthew Higgins

Matthew Higgins

Federal Reserve Bank of New York

Thomas Klitgaard

Federal Reserve Bank of New York

Date Written: December 2007

Abstract

Despite heavy borrowing in recent years, the United States has financed its large current account deficits without experiencing an unusual buildup in foreign investors' holdings of U.S. assets. A new analysis suggests that this somewhat surprising development is attributable largely to rapid financial globalization, with cross-border flows worldwide rising as fast as flows into the United States. However, it could be harder for the country to sustain large deficits on favorable terms if the current wave of globalization subsided or the rate at which U.S. investors buy foreign assets increased.

Keywords: financial globalization, cross-border financial flows, current account adjustment, balance of payments, external assets, international asset position

JEL Classification: F32, F36

Suggested Citation

Higgins, Matthew and Klitgaard, Thomas, Financial Globalization and the U.S. Current Account Deficit (December 2007). Current Issues in Economics and Finance, Vol. 13, No. 11, December 2007. Available at SSRN: https://ssrn.com/abstract=1080265 or http://dx.doi.org/10.2139/ssrn.1080265

Matthew Higgins

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Thomas Klitgaard (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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