The aim of this paper is to examine the ‘dark matter’ assets in the external sector of the United States in the period 1999:Q1-2018:Q3. The paper investigates data on the balance of payments and international investment position for the US and a group of 18 economies. The research reveals that the US is a privileged economy with respect to foreign income on international investments. The rates of return on its foreign assets are relatively higher, and the costs incurred on its foreign liabilities relatively lower, as compared with the benchmark group. This special privilege of the US relates to equity investments, especially foreign direct investments. Based on prevailing income differentials substantial ‘dark matter’ assets of the US are estimated. Recognising such ‘dark matter’ leads to the conclusion that the US is a foreign creditor, not debtor. The findings shed light on the puzzle as to why the US has a continuing ability to sustain its external position despite mounting foreign liabilities.
If the inline PDF is not rendering correctly, you can download the PDF file here.
Ahearne A. Cline W. R. Lee K. T. Park Y. C. Pisani-Ferry J. & Williamson J. (2007). Global imbalances: Time for action. Policy Brief No. PB 07-4: Peterson Institute for International Economics.
Ali M. (2016). Dark matter black holes and old-fashioned exploitation: Transnational corporations and the US economy. Cambridge Journal of Economics40(4) 997-1018.
Altman E. I. & Kuehne B. J. (2016). Credit markets and bubbles: Is the benign credit cycle over?. Economics and Business Review2(3) 20-31.
Ayres J. (2018). Firm knowledge and international business cycles. Discussion Paper No. IDB-DP-584: Inter-American Development Fund.
Bosworth B. Collins S. M. & Chodorow-Reich G. (2007). Returns on FDI: Does the US really do better? (Working Paper No. 13313: National Bureau of Economic Research).
Cline W. R. (2005). The United States as a debtor nation. Washington DC: Peterson Institute for International Economics.
Curcuru S. E. & Thomas C. P. (2015). The return on US direct investment at home and abroad. In C. R. Hulten & M. B. Reinsdorf (Eds.) Measuring wealth and financial intermediation and their links to the real economy (pp. 205-230). Chicago: University of Chicago Press.
Curcuru S. E. Thomas C. P. & Warnock F. E. (2013). On returns differentials. Journal of International Money and Finance36 1-25.
Dooley M. P. Folkerts-Landau D. & Garber P. (2003). An essay on the revived Bretton Woods system. (Working Paper No. 9971: National Bureau of Economic Research).
Dooley M. P. Folkerts-Landau D. & Garber P. (2004). The revived Bretton Woods system. International Journal of Finance and Economics9 307-313.
Dooley M. P. Folkerts-Landau D. & Garber P. (2009). Bretton Woods II still defines the international monetary system. (Working Paper No. 14731: National Bureau of Economic Research).
Doornik J. A. & Hansen H. (2008). An omnibus test for univariate and multivariate normality. Oxford Bulletin of Economics and Statistics70 927-939.
EC. (2015 June 17). Action plan for fair and efficient corporate taxation: Speaking points of Commissioner Pierre Moscovici. European Commission Brussels.
EC. (2018). Evolution of the EU list of tax havens. European Commission. Retrieved from https://ec.europa.eu/taxation_customs/sites/taxation/files/eu,_list_update_25_May_2018_en.pdf
Economist The. (2006 January 19). America’s dark materials. Retrieved October 28 2018 from https://www.economist.com/finance-and-economics/2006/01/19/americas-dark-materials
Edwards S. (2005). The end of large current account deficits 1970-2002: Are there lessons for the United States? (Working Paper No. 11669: National Bureau of Economic Research).
Gourinchas P.-O. & Rey H. (2007). From world banker to world venture capitalist: US external adjustment and the exorbitant privilege. In R. H. Clarida (Ed.) G7 Current account imbalances: Sustainability and adjustment (pp. 11-66). Chicago: University of Chicago Press.
Gros D. (2006a). Foreign investment in the US (II): Being taken to the cleaners?. (Research Notes No. 13: Deutsches Institut für Wirtschaftsforschung).
Gros D. (2006b). Why the US current account deficit is not sustainable. International Finance9(2) 241-260.
Hausmann R. & Sturzenegger F. (2006). Why the US current account deficit is sustainable. International Finance9(2) 223-240.
Hausmann R. & Sturzenegger F. (2007). The valuation of hidden assets in foreign transactions: Why ‘dark matter’ matters. Business Economics42(1) 28-34.
Heath A. (2007). What explains the US net income balance? (Working Paper No. 223: Bank for International Settlements).
Higgins M. Klitgaard T. & Tille C. (2005). The income implications of rising US international liabilities. Current Issues in Economics and Finance11(12) 1-9.
Hill T. & Lewicki P. (2006). Statistics: methods and applications: A comprehensive reference for science industry and data mining. Tulsa: StatSoft.
IMF. (2009). Balance of payments and international investment position manual (BPM6 6th ed.). Washington DC: International Monetary Fund.
Ito H. & McCauley R. N. (2018). A key currency view of global imbalances. (Working Paper). Retrieved from https://ies.keio.ac.jp/upload/20180710_macro_ito_wp-Itoand-McCauley-paper-on-currency-zones-hi-180706.pdf
Jarque C. M. & Bera A. K. (1980). Efficient tests for normality homoscedasticity and serial independence of regression residuals. Economics Letters6(3) 255-259.
Kitchen J. (2007). Sharecroppers or shrewd capitalists? Projections of the US current account international income flows and net international debt. Review of International Economics 15(5) 1036-1061.
Kristinsson T. O. (2016). Net errors and omissions in balance of payments statistics. Impacts casuses and effects. Thesis. Retrieved from https://run.unl.pt/bit-stream/10362/19594/1/TEGI0370.pdf
Lilliefors H. W. (1967). On the Kolmogorov-Smirnov test for normality with mean and variance unknown. Journal of the American Statistical Association62(318) 399-402.
Lilliefors H. W. (1969). On the Kolmogorov-Smirnov test for the exponential distribution with mean unknown. Journal of the American Statistical Association64(325) 387-389.
McGrattan E. R. & Prescott E. C. (2010). Technology capital and the US current account. American Economic Review100(4) 1493-1522.
Obstfeld M. & Rogoff K. (2000). Perspectives on OECD economic integration: Implications for US current account adjustment. (Paper presented at the conference ‘Global Economic Integration: Opportunities and Challenges’ Jackson Hole).
Obstfeld M. & Rogoff K. (2004). The unsustainable US current account revisited. (Working Paper No. 10869: National Bureau of Economic Research).
Obstfeld M. & Rogoff K. (2005). Global current account imbalances and exchange rate adjustments. Brookings Papers on Economic Activity (1) 67-146.
Pera J. (2016). The risk of the increasing divergence of the eurozone and the problem of macroeconomic imbalances in a three-gap model. Economics and Business Review2(2) 18-38.
Roubini N. (2006). The BW 2 regime: An unstable disequilibrium bound to unravel. International Economics and Economic Policy3(3-4) 303-332.
Roubini N. & Setser B. (2005). Will the Bretton Woods 2 regime unravel soon? The risk of a hard landing in 2005-2006. (Paper presented at the symposium ‘The Revived Bretton Woods System: A New Paradigm for Asian Development?’ San Francisco).
Shapiro S. S. & Wilk M. B. (1965). An analysis of variance test for normality (complete samples). Biometrika52(3/4) 591-611.
Sobanski K. (2010). Zjawisko globalnej nierównowagi a stabilność rozwoju gospodarki światowej – ujęcie retrospektywne i prospektywne. Acta Universitatis Lodziensis Folia Oeconomica238 217-229.
Sobanski K. (2015). Valuation effect as a determinant of the international investment position in Central and Eastern European economies. Equilibrium. Quarterly Journal of Economics and Economic Policy10(3) 151-164.
Wolf M. (2004 August 17). America on the comfortable path to ruin. Financial Times. Retrieved from https://www.ft.com/content/488f2e14-f07a-11d8-a553-00000e2511c8