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Financial globalization and the U.S. current account deficit

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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.

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  • Matthew Higgins & Thomas Klitgaard, 2007. "Financial globalization and the U.S. current account deficit," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 13(Dec).
    • Handle: RePEc:fip:fednci:y:2007:i:dec:n:v.13no.11
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    Cited by:

    1. Adam S. Posen, 2008. "Why the Euro will Not Rival the Dollar," International Finance, Wiley Blackwell, vol. 11(1), pages 75-100, May.
    2. Badar Alam Iqbal & Mohd Nayyer Rahman & Abdul Turay, 2017. "Indo-US Bilateral FDI and Current Account Balance: Developing Causal Relationship," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 6, March.
    3. Karel Brůna, 2013. "Koncept udržitelnosti negativní čisté investiční pozice a jeho aplikace na příkladu České republiky v letech 1999-2011 [A Concept of Sustainability of Negative Net International Investment Position," Politická ekonomie, Prague University of Economics and Business, vol. 2013(1), pages 67-90.

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