From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege

Pierre-Olivier Gourinchas () and Helene Rey ()

No 11563, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Does the center country of the International Monetary System enjoy an "exorbitant privilege" that significantly weakens its external constraint as has been asserted in some European quarters? Using a newly constructed dataset, we perform a detailed analysis of the historical evolution of US external assets and liabilities at market value since 1952. We find strong evidence of a sizeable excess return of gross assets over gross liabilities. Interestingly, this excess return increased after the collapse of the BrettonWoods fixed exchange rate system. It is mainly due to a "return discount": within each class of assets, the total return (yields and capital gains) that the US has to pay to foreigners is smaller than the total return the US gets on its foreign assets. We also find evidence of a "composition effect": the US tends to borrow short and lend long. As financial globalization accelerated its pace, the US transformed itself from a World Banker into a World Venture Capitalist, investing greater amounts in high yield assets such as equity and FDI. We use these findings to cast some light on the sustainability of the current global imbalances.

JEL-codes: F3 N1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn
Date: Written
Note: EFG IFM
View list of references View citations in EconPapers

Published relationship to a non-chapter. This should not happen. Please contact NBER.

Downloads: (external link)
http://www.nber.org/papers/w11563.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Chapter: From World Banker to World Venture Capitalist: U.S. External Adjustment and the Exorbitant Privilege (2007)
Working Paper: From World Banker to World Venture Capitalist: US External Adjustment and The Exorbitant Privilege (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:11563

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w11563
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().