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The Looming U.S. External Debt: How Serious Is It?

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  • JUANN HUNG
  • SUSAN CHARRETTE

Abstract

This article examines the state of U.S. external debt accumulation, especially the rising burden of interest payments. It points out that the favorable yield differential between U.S. external assets and liabilities may be declining at the same time the United States has become the world's largest international debtor. The favorable yield differential has enabled the United States, which became a net debtor in 1987, to avoid making net interest payments on its international debt until 1994. However, servicing the increasing U.S. net international debt is likely to be a much greater burden in the future as the favorable yield gap wanes while net debt continues to grow.

Suggested Citation

  • Juann Hung & Susan Charrette, 1997. "The Looming U.S. External Debt: How Serious Is It?," Contemporary Economic Policy, Western Economic Association International, vol. 15(3), pages 32-41, July.
    • Handle: RePEc:bla:coecpo:v:15:y:1997:i:3:p:32-41
    DOI: 10.1111/j.1465-7287.1997.tb00475.x
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    References listed on IDEAS

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    1. Hung, Juann H., 1997. "The exchange rate's impact on overseas profits of U.S. multinationals," Journal of Economics and Business, Elsevier, vol. 49(5), pages 439-458.
    2. Fisher, Eric O'N, 1995. "A New Way of Thinking about the Current Account," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 555-568, August.
    3. Grubert, Harry & Mutti, John, 1991. "Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 285-293, May.
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    Cited by:

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    2. Lori L. Leachman & Michael Thorpe, 1998. "Intertemporal Solvency in the Small Open Economy of Australia," The Economic Record, The Economic Society of Australia, vol. 74(226), pages 231-242, September.

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