Unsustainable US Current Account Position - Obstfeld & Rogoff (2007)

Develops a simply 2-country model to estimate the ramifications of an unwinding of the US current account deficit. Argues that dollar adjustment to global current account rebalancing depends more on goods market integration rather than the depth of capital markets.

Argues that dollar decline is not likely to be benign, as in the 1980s, but more closely parallel the collapse of Bretton Woods in the 1970s. The closure of the CA deficit, (now at 7%), requires a potential collapse 50% larger than previous estimates. (thus 18-21%?, closer to 40% if pass-through is incomplete), because CA is not large proportion of GDP, but is a larger proportion of tradables (about 20%)

Contains stylized facts on the trajectory of the US current account, a model of the CA based on demand and pass-through, tradables and non-tradables and then calibrates the model with parameters from previous empirical papers. No regressions. Tille (2004) - estimate US assets and liabilities denominated in foreign currencies. Nordhaus (2002) - 3% tradables involved in Iraq War commitment. Campa and Goldberg (2002) - US Pass through estimates.

International Financial Adjustment - Gourinchas & Rey (2007)

Implications of a country's external constraint for the dynamics of net foreign assets, returns and exchange rates. Deteriorations in external accounts imply future trade surpluses (trade channel) or excess returns on the net foreign portfolio (valuation channel), with valuation effects accounting for 27% of the external adjustment. External imbalances predict net foreign portfolio returns one quarter to 2 years ahead and net export growth at longer horizons. The exchange rate is forecastable in and out of sample at one quarter and beyond.

Examine cycle by detrending (exports, imports, external assets, liabilities)/domestic wealth. Use VAR to quantify share coming from net exports and valuation effects. Data involved is the relevant US quarterly data.
Net and foreign asset positions of the US are available from
2. Federal Reserve Flow of Funds Account (for RoTW)
They tend reconstruct market value estimate by using FFA flow and position data
They have data (Gourinchas & Rey 2007)
Net Exports = meanx*shockx - meanm*shockm Net valuation = meana*shocka - meanl*shockl
rho = 1 + (X-M)/(A-L)
netchange(t+1) = 1/rho(netchange)t + r(t+1) + changeinnetchange(t+1)

Global Imbalances, Globalization, Demography and Sustainability, Cooper (2008)

Again, US Current Account facts, 1993-2007, and GDP components (S&I), Capital Flows, Net International Investment Position (with financial flows and valuation effects)
from Bureau of Economic Analysis/St Louis Fed (FRED)
Rest of the World Current Account Balances, Savings, Investment - IMF, IMF World Economic Outlook
US Census Bureau Projections for country populations (!!Singapore & HK = 1.0 TFR)
Argument: We save so much because birth rates are low (low investment), and we are in earning part of lifecycle. But why do funds flow to the US? Why not emerging markets? And what about Italy, Spain, UK? & then special features of US financial markets etc...
IMF IFS/Annual Report : foreign central bank holdings, RoTW gross and net international investment position

Bretton Woods II - Dooley, Folkerts-Landau, Garber (2004)

Basically summarizes the willingness of Asian Governments to sustain their currencies at a level to fund their export-oriented development strategy, especially investing in US treasuries, resulting in low interest rates.

Equilibrium Model of Global Imbalances - Caballero, Farhi & Gourinchas (2008)

Current Account by Region -- World Development Indicators and Deutsche Bank
World and US interest rates -- IMF IFS
Share of US Assets in World's Output and Wealth -- BEA, WDI, ECB, BoJ
Just a lot of modelling, nothing I can really use. Asset Supply Constraints and different-type countries.

From World Banker to World Venture Capitalist, US External Adjustment & the Exorbitant Privilege - Gourinchas & Rey (2005)

Dataset on historical evolution of US assets and liabilities at market value since 1952, and finds evidence of excess returns on US external assets compared to liabilities, which emerged after Bretton Woods. US tends to borrow short and lend long.
US Treasury 1997 Benchmark Surveys of U.S. Ownership of Foreign Long-term securities
US Treasury 2000 holdings of Foreign Long Term Securities

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