Where Did All the Borrowing Go? A Forensic Analysis of the U.S. External Position

37 Pages Posted: 5 Jun 2008

See all articles by Philip R. Lane

Philip R. Lane

Trinity College (Dublin) - Department of Economics; Centre for Economic Policy Research (CEPR); Central Bank of Ireland

Gian Maria Milesi-Ferretti

International Monetary Fund (IMF); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2008

Abstract

The deterioration in the U.S. net external position in recent years has been much smaller than the extensive net borrowing associated with large current account deficits would have suggested. This paper examines the sources of discrepancies between net borrowing and accumulation of net liabilities for the U.S. economy over the past 25 years. In particular, it highlights and quantifies the role played by net capital gains on the U.S. external portfolio and 'residual adjustments' in explaining this discrepancy. It discusses whether these 'residual adjustments' are likely to be originating from measurement errors in external assets and liabilities, financial flows, or capital gains, and explores the implications of these conjectures for the U.S. financial account and external position.

Keywords: Capital flows, current account, external adjustment, external assets and liabilities, Financial integration, net foreign asset position

JEL Classification: F21, F32, F41

Suggested Citation

Lane, Philip R. and Milesi-Ferretti, Gian Maria, Where Did All the Borrowing Go? A Forensic Analysis of the U.S. External Position (January 2008). , Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1140584

Philip R. Lane (Contact Author)

Trinity College (Dublin) - Department of Economics ( email )

Trinity College
Dublin 2
Ireland
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Centre for Economic Policy Research (CEPR)

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United Kingdom

Central Bank of Ireland ( email )

P.O. Box 559
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Ireland

Gian Maria Milesi-Ferretti

International Monetary Fund (IMF) ( email )

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United States
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202-589-7441 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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