Financing U.S. debt: Is there enough money in the world – and at what cost?

John Kitchen () and Menzie Chinn

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the potential role for foreign official holdings of U.S. Treasury securities and the associated implications for Treasury security interest rates, international portfolio allocations, net international income flows, and the U.S. net international debt position, using a baseline outlook of current and projected U.S. budget deficits and growing debt. The analysis applies empirical results regarding the role of U.S. structural budget deficits and foreign official holdings of U.S. Treasuries in determining Treasury security interest rates. Although initial review of information suggests that the world portfolio could potentially accommodate financing requirements over the intermediate horizon, substantial uncertainty remains about the relationships among foreign official holdings, exchange rates, and trade; the potential effects of “crowding out” in the international portfolio; and how and whether world portfolio allocations would adjust to accommodate higher shares of U.S. assets.

Keywords: budget; debt; deficit; interest rates; international (search for similar items in EconPapers)
JEL-codes: E43 E62 E66 (search for similar items in EconPapers)
Date: 2010-08-12
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Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/24736/1/MPRA_paper_24736.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/29151/2/MPRA_paper_29151.pdf revised version (application/pdf)

Related works:
Journal Article: Financing US Debt: Is There Enough Money in the World – and at What Cost? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:24736

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