Working Paper: CEPR ID: DP18659
Authors: Gian Maria Milesi-Ferretti
Abstract: The past decade has seen a remarkable widening of global creditor and debtor positions in relation to world GDP, with the lion’s share of net external liabilities accounted for by the United States, and a surge in net global claims particularly in advanced Europe and smaller economies of advanced Asia. This has occurred despite a compression in global current account imbalances. This paper explores the factors underpinning these developments, highlighting the role of the US asset price boom and dollar appreciation in widening the net US debtor position, and examines how, where, and to what extent those valuation gains are reflected in other countries’ external accounts. It also looks at the economic and structural factors explaining the emergence of new large international creditors, highlighting common features but also important country-specific factors.
Keywords: Valuation Effects
JEL Codes: F31; F32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US dollar appreciation (F31) | deterioration in US net international investment position (NIIP) (F32) |
| US asset price boom (G19) | deterioration in US net international investment position (NIIP) (F32) |
| US asset price boom (G19) | net valuation losses on US external portfolio (F21) |
| US stock prices rise (G12) | net valuation losses on US external portfolio (F21) |
| performance of US equity markets (G12) | external positions of creditor countries (F34) |
| valuation changes (D46) | widening of global stock imbalances (F65) |