Working Paper: NBER ID: w29771
Authors: Andrew Atkeson; Jonathan Heathcote; Fabrizio Perri
Abstract: The U.S. net foreign asset position has declined sharply since 2007 and is currently negative 65 percent of U.S. GDP. This deterioration primarily reflects a U.S.-specific rise in corporate asset values that has inflated the value of U.S. equity liabilities to the rest of the world. To interpret these trends we develop an international macro finance model of flows, stocks, asset valuations, the current account, and the net foreign asset position. We find that the welfare impact of rising asset values for a representative U.S. household has been quite negative given extensive foreign ownership of U.S. corporate equity.
Keywords: Net Foreign Asset Position; Corporate Valuation; Welfare Implications
JEL Codes: F30; F40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Decline in US NFA position (N22) | Boom in market valuation of non-financial assets in US corporations (G32) |
| Negative impact of asset revaluations (G32) | Deterioration in US NFA position (F32) |
| Rising asset values (G19) | Negative welfare impact for US households (H53) |
| Ownership of US corporations (G32) | Welfare impact of increase in output wedge (D69) |
| Cross-border equity positions (F21) | Negative impact on US residents' consumption (F61) |
| Increase in corporate free cash flow (G39) | Increased market valuation of US corporations (G32) |