What Explains the US Net Income Balance?

Heath, Alexandra

doi:10.2139/ssrn.1012802

Cited by 9 publications

(9 citation statements)

References 22 publications

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“…5 Cline (2005) and Hausmann and Sturzenegger (2007) capitalize the investment income streams into alternative estimates of the net foreign asset position. See also Buiter (2006), Gros (2006aGros ( , 2006b, Higgins et al (2007), Heath (2007), and Kitchen (2007) on the investment income debate. 1976-1982 1983-1992 1993-2001 2002-2007 Change in total assets (FDI at current cost) 20.0 −0.4 3 1 .5…”

Section: Dynamics Of the Net Foreign Asset Position: A Benchmark Decomentioning

confidence: 99%

Where did all the borrowing go? A forensic analysis of the U.S. external position

Lane¹,

Milesi‐Ferretti²

2009

Journal of the Japanese and International Economies

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Section: Dynamics Of the Net Foreign Asset Position: A Benchmark Decomentioning

confidence: 99%

Where did all the borrowing go? A forensic analysis of the U.S. external position

Lane¹,

Milesi‐Ferretti²

2009

Journal of the Japanese and International Economies

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“…In other words, the official data show the US economy earning a net 1.1% of GDP based on a -41% of GDP position! However one interprets this (Heath (2007), Gourinchas and Rey (2014), McCauley (2015)), the US negative net position does not seem to be spiralling in the manner that one might expect from the size of the current account deficits shown in Table 1.…”

Section: What Is the Systemic Breakdown?mentioning

confidence: 82%

Triffin: dilemma or myth?

Bordo¹,

McCauley²

2018

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Triffin gained enormous influence by reviving the interwar story that gold scarcity threatened deflation. In particular, he held that central banks needed to accumulate claims on the United States to back money growth. But the claims would eventually surpass the US gold stock and then central banks would inevitably stage a run on it. He feared that the resulting high US interest rates would cause global deflation. However, we show that the US gold position after WWII was no worse than the UK position in 1900. Yet it took WWI to break sterling's gold link. And better and feasible US policies could have kept Bretton Woods going. This history serves as a backdrop to our critical review of two later extensions of Triffin. One holds that the dollar's reserve role required US current account deficits. This current account Triffin is popular, but anachronistic, and flawed in logic and fact. Nevertheless, it pops up in debates over the euro's and the renminbi's reserve roles. A fiscal Triffin holds that global demand for safe assets will either remain dangerously unsatisfied, or force excessive US fiscal debt. Less flawed, this story posits implausibly inflexible demand for and supply of safe assets. Thus, these stories do not convince in their own terms. Moreover, each lacks Triffin's clear cross-over point from a stable system to an unstable one. Triffin's seeming predictive success leads economists to wrap his brand around dissimilar stories. Yet Triffin's dilemma in its most general form correctly points to the conflicts and difficulties that arise when a national currency plays a role as an international public good.

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“…There is also the puzzling observation that the U.S. economy is still earning net investment income from the rest of the world despite its net international liabilities (Heath 2007;Curcuru et al 2013). The BEA estimates U.S. net international investment income in 2014 was $247 billion, a credit.…”

Section: The Current Account Triffin: Systemic Breakdown?mentioning

confidence: 99%

“…See BIS (2015, p. 96) on valuation effects across different sectors in the Korean economy, andBruno and Shin (2015a, 2015b, 2015c.…”

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confidence: 99%

The Current Account Version of the Triffin Dilemma

Bordo

McCauley

2016

Atl Econ J

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This article reviews the most popular restatement of the Triffin dilemma. It holds that the United States must run current accounts to permit the rest of the world to accumulate dollar reserves but doing so undermines the U.S. solvency. While the original Triffin dilemma pointed to a clear moment of systemic instability, the current account version points to a more amorphous risk of an unbounded rise in U.S. net international liabilities. The empirical work reviewed suggests that savings-investment fundamentals predict narrower U.S. current account deficits than those observed. However, the link to the reserve currency role of the dollar, rather than the U.S. economy's size or the depth of its financial markets, remains to be convincingly made. Under the circumstances, the proposition that the future of the renminbi as a reserve currency depends on China's running current account deficits rather than current account surpluses should not be accepted.

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What Explains the US Net Income Balance?

Cited by 9 publications

References 22 publications

Where did all the borrowing go? A forensic analysis of the U.S. external position

Where did all the borrowing go? A forensic analysis of the U.S. external position

Triffin: dilemma or myth?

The Current Account Version of the Triffin Dilemma

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