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The income implications of rising U.S. international liabilities

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Abstract

Although the United States has seen its net liabilities surge in recent years, its investment income balance has remained positive-largely because U.S. firms operating abroad earn a higher rate of return than do foreign firms operating here. The continuing buildup in liabilities, however, should soon push the U.S. income balance below zero. In that event, net income flows will begin to boost the nation's current account deficit instead of reducing it.

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  • Matthew Higgins & Thomas Klitgaard & Cédric Tille, 2005. "The income implications of rising U.S. international liabilities," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 11(Dec).
    • Handle: RePEc:fip:fednci:y:2005:i:dec:n:v.11no.12
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    References listed on IDEAS

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    1. Gian Maria Milesi-Ferretti, & Philip R. Lane, 2003. "International Financial Integration," The Institute for International Integration Studies Discussion Paper Series iiisdp03, IIIS.
    2. Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2004. "The Performance of International Equity Portfolios," International Finance Discussion Papers 817, Board of Governors of the Federal Reserve System (U.S.).
    3. Cédric Tille, 2003. "The impact of exchange rate movements on U.S. foreign debt," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Jan).
    4. Matthew Higgins & Thomas Klitgaard, 1998. "Viewing the current account deficit as a capital inflow," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 4(Dec).
    5. Pierre-Olivier Gourinchas & Hélène Rey, 2007. "From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 11-66, National Bureau of Economic Research, Inc.
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