A Portfolio Approach to Global Imbalances

Zhengyang Jiang, Robert Richmond and Tony Zhang

No 30253, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use a portfolio-based framework to understand what drives the decline of the U.S. net foreign asset (NFA) position and the reversal in returns earned on the US NFA (exorbitant privilege). We show that global savings gluts and monetary policies widened the U.S. NFA position, while investor demand shifts partially offset this widening. Moreover, U.S. privilege declined after 2010, in accordance with increasing foreign demand for U.S. equity. We also highlight a quantity dimension of the U.S. privilege: the U.S. can issue substantially more debt than other countries for a given yield increase.

JEL-codes: E44 F32 G15 (search for similar items in EconPapers)
Date: 2022-07
New Economics Papers: this item is included in nep-ifn and nep-opm
Note: AP IFM
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Citations: View citations in EconPapers (14)

Published as ZHENGYANG JIANG & ROBERT J. RICHMOND & TONY ZHANG, 2024. "A Portfolio Approach to Global Imbalances," The Journal of Finance, vol 79(3), pages 2025-2076.

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