Cross-border returns differentials
By: Stephanie E. Curcuru, Tomas Dvorak, Francis E. Warnock.
Contributors: Dvořák, Tomáš, 1973-; Warnock, Francis E.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13768; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13768.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Were the U.S.  to persistently earn substantially more on its foreign investments ("U.S.  claims") than foreigners earn on their U.S.  investments ("U.S.  liabilities"), the likelihood that the current environment of sizeable global imbalances will evolve in a benign manner increases.  However, using a monthly dataset on the foreign equity and bond portfolios of U.S.  investors and the U.S.  equity and bond portfolios of foreign investors, we find that the returns differential for portfolio securities is near zero, far smaller than previously reported.  Examining all U.S.  claims and liabilities (portfolio securities as well as direct investment and banking), we find that previous estimates of large differentials are biased upward.  The bias owes to computing implied returns from an internally inconsistent dataset of revised data; original data produce a much smaller differential.  We also attempt to reconcile our finding of a near zero returns differential with observed patterns of cumulated current account deficits, the net international investment position, and the net income balance.  Overall, we find no evidence that the U.S.  can count on earning substantially more on its claims than it pays on its liabilities.*Published: forthcoming Quarterly Journal of Economics"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/12/2008.

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