International Capital Flows and Debt Dynamics
Martin Evans ()
Working Papers from Georgetown University, Department of Economics
This paper presents a new model for studying international capital flows and debt dynamics. The model emphasizes the role of expectations concerning future trade flows and returns as the determinants of a country's foreign asset and liability positions, and how revisions in these expectations drive gross and net capital flows. I use the model to estimate the drivers of the U.S. external position and capital flows between 1973 and 2008. The estimates show that most of the secular rise in U.S. international indebtedness is attributable to growing optimism about future returns on U.S. holdings of foreign equity and FDI assets. Expectations concerning future returns are also the most important determinant of net capital flows, but the flows themselves are not important drivers of the U.S. external position. My estimates also show that the transformation of world savings into risky assets by the U.S. had little effect on its external position, but the expected real depreciation of the dollar allowed the U.S. to sustain a much higher level of international debt after the 1990s.
Keywords: Capital Flows; External Imbalances; International Debt; International Solvency; Exorbitant Privilege (search for similar items in EconPapers)
JEL-codes: F31 F32 F34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://www8.georgetown.edu/departments/economics/pdf/1204.pdf Full text (application/pdf)
Working Paper: International Capital Flows and Debt Dynamics (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:geo:guwopa:gueconwpa~12-12-04
Ordering information: This working paper can be ordered from
Roger Lagunoff Professor of Economics Georgetown University Department of Economics Washington, DC 20057-1036
Access Statistics for this paper
More papers in Working Papers from Georgetown University, Department of Economics Georgetown University Department of Economics Washington, DC 20057-1036.
Series data maintained by Marcia Suss ().