Foreign Ownership of U.S. Safe Assets: Good or Bad?

Jack Favilukis, Sydney Ludvigson and Stijn Van Nieuwerburgh

No 19917, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The last 20 years have been marked by a sharp rise in international demand for U.S. reserve assets, or safe stores-of-value. What are the welfare consequences to U.S. households of these trends, or of a reversal? In a lifecycle model with aggregate and idiosyncratic risks, the young and oldest households may benefit substantially from such capital inflows, but middle-aged savers may suffer from greater exposure to systematic risk in equity and housing markets. Under the veil of ignorance, a newborn in the lowest wealth quantile is willing to forego 2.7% of lifetime consumption to avoid a large capital outflow.

JEL-codes: G1 G11 G12 G15 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-ifn
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Working Paper: Foreign Ownership of U.S. Safe Assets: Good or Bad? (2012)
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