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G7 Current Account ImbalancesSustainability and Adjustment$
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Richard H. Clarida

Print publication date: 2007

Print ISBN-13: 9780226107264

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226107288.001.0001

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A Global Perspective on External Positions

A Global Perspective on External Positions

(p.67) 2 A Global Perspective on External Positions
G7 Current Account Imbalances

Philip R. Lane

Gian Maria Milesi-Ferretti

University of Chicago Press

This chapter explores the increased dispersion in net external positions in recent years, particularly among industrial countries. Return differentials between external assets and liabilities can potentially exert significant impacts on the dynamics of net foreign assets. There is some evidence that a shift in returns is connected with a subsequent change in the level of capital flows. The analysis of relative rates of return and capital flows reveals that U.S. residents have consistently earned higher returns on their assets than they pay out on their liabilities. It also shows that the real dollar returns on foreign investment in the United States have on average been negative over the past four years and even more so when expressed in the currencies of most foreign investor countries. Since 2000, capital flows to the United States have shifted toward fixed-rate (and low-yield) debt instruments and away from equities.

Keywords:   net foreign assets, industrial countries, external assets, liabilities, capital flows, dollar returns, foreign investment, United States

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