Notice of Retraction: International Investment Position and Its Impact on the Current Account

The recent depreciation of the dollar against major currencies of the world, notably the euro, has kindled discussion on the causes of this phenomenon and the possible outcomes should it continue. Many politicians blame the rising U.S. current account deficit and some economists have questioned the sustainability of the current account deficit. This paper examines the relationship between the U.S. current account balance, the net U.S. international investment position, and the exchange value of the dollar. Our results show that there is a relationship between the exchange value of the dollar and the current account balance. However, our results do not show that the current account balance is solely responsible for changes in the exchange value of the dollar. This is not surprising given the many influences currently under investigation as possible explanations for the recent behavior of the dollar.

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Why did the United States Evolve from the Largest International Creditor in 1980 to the Largest International Debtor in 1990?

Atlantic Economic Journal ◽

10.1007/s11293-020-09695-x ◽

2020 ◽

Vol 48 (4) ◽

pp. 405-411

Author(s):

Robert Aliber

Keyword(s):

Current Account ◽

Current Account Deficit ◽

The United States ◽

Household Wealth ◽

International Investment ◽

Domestic Saving ◽

Net Foreign Assets ◽

International Investment Position ◽

The U.S ◽

Foreign Assets

AbstractRemarkable transformation of the U.S. international investment position occurred over the last 40 years. U.S. net foreign assets were larger than combined net foreign assets of all other creditors. By 1990, foreign-owned U.S. securities and real assets were larger than U.S. owned foreign securities and assets. This change occurred without the U.S. Treasury borrowing in foreign currency and few U.S. firms borrowing, reflecting a surge in foreign purchases of U.S. securities. Inferences from the currency composition of portfolio changes of those who acquired U.S. dollar securities suggest that foreign savers took the initiative on cross-border investment inflows. The U.S. could not have developed a larger capital account surplus after 1980 unless a similar increase in the U.S. current account deficit occurred. The primary factor that led to the U.S. current account deficit increase was the surge in U.S. stocks and other asset prices, resulting in a U.S. household wealth surge and consumption boom. The foreign saving inflow displaced domestic saving. In addition, an increase in the price of the U.S. dollar led to expenditure-switching from U.S. goods to increasingly less expensive foreign goods. When investor demand for U.S. dollar securities declined, the U.S. dollar price fell in 1992, 2002, and 2020 and the price of U.S. dollar securities declined. The paper discusses the source of the change in the U.S. international investment position, the flow of foreign saving to the U.S., cyclical variability in the foreign saving flow to the U.S., and the potential impact of an adjustable parity arrangement.

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CURRENT ACCOUNT DEFICIT AND ECONOMIC GROWTH IN ARMENIA

STUDIES AND SCIENTIFIC RESEARCHES ECONOMICS EDITION ◽

10.29358/sceco.v0i21.299 ◽

2015 ◽

Cited By ~ 1

Author(s):

Arus Tunian

Keyword(s):

Economic Growth ◽

Current Account ◽

Open Economy ◽

Raw Materials ◽

Current Account Deficit ◽

Small Open Economy ◽

International Investment ◽

Customs Union ◽

Negative Balance ◽

International Investment Position

The article is devoted to the study of the problem of economic growth in Armenia. It is identified the nature of the balance of payments of the country, indicating a net debtor position, which leads to inherent deterioration of the international investment position. A small open economy of Armenia moves to a new phase of development, in the frame of the integration processes within the Customs Union and the Eurasian Economic Union of Russia, Belarus and Kazakhstan. One of the main characteristics of the Armenian economy vulnerability remains a negative balance in foreign trade, which continues to grow, despite the export growth. Economic growth is provided, as before, mostly due to the sale of raw materials - non-ferrous metals and metal ores, both in the primary as well as in the previous preprocessing. Estimating the econometric VAR models revealed that the negative current account impacts on GDP growth negatively.

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Short and Long Term Determinants of the Net International Investment Position Resulting from the Balance of Payments of the European Monetary Union Countries

Acta Universitatis Lodziensis Folia oeconomica ◽

10.18778/0208-6018.336.13 ◽

2018 ◽

Vol 4 (336) ◽

pp. 209-224

Author(s):

Paweł Śliwiński

Keyword(s):

Current Account ◽

Euro Area ◽

Large Scale ◽

International Investment ◽

Valuation Effect ◽

Positive Balance ◽

Short And Long Term ◽

Net Foreign Asset ◽

International Investment Position

The paper aims at analysing the level, composition and factors determining changes of the net international investment position (NIIP) of the euro area countries. Although the improvement in the euro area’s NIIP during the period from 2Q2012 to 2Q2016 was largely driven by current account surpluses in 13 out of 19 countries, there is a visible difference between the NIIP changes and their components in the surplus and deficit countries. The group of net foreign assets countries increased its position primarily by running current account surpluses reflecting mainly a positive balance on goods and, on a minor scale, a positive primary income balance. The NIIP in the group of net foreign liabilities countries deteriorated although the cumulative current accounts were in surplus for this period. Here, the current account improvement was largely driven by services which, in contrast to the net foreign asset countries, were in surplus. In turn, the cumulative primary income in the group of net foreign liabilities countries was in minus. Statistical analysis aimed at estimation of determinants of the changes in the NIIPs over the subsequent quarters shows that their short term behaviour was on a large scale positively driven by the changes of valuation effect resulting, for example, from exchange rates and prices movements. It should not be surprising that the signs which indicate the direction of valuation effect on the NIIP pattern are different in the short and long term. It should be stressed that the valuation effect influence decreases over time since valuation gains and losses overlap and largely neutralise each other. Nevertheless, combined losses were higher than total gains and therefore its impact on the NIIP was negative in the analysed period. On the other hand, the EMU current account surpluses were repetitive and persistent, being the main factor behind the improvement of the cumulative euro area NIIP changes.

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Global imbalances from the flow and stock perspective

Journal of Management and Financial Sciences ◽

10.33119/jmfs.2019.38.2 ◽

2020 ◽

Author(s):

Renata Knap

Keyword(s):

Current Account ◽

Global Financial Crisis ◽

International Investment ◽

Global Imbalances ◽

Global Flow ◽

Flow Imbalance ◽

The Global Financial Crisis ◽

International Investment Position ◽

Global Stock ◽

Current Account Balances

The objective of the paper is to identify global payment imbalances from the flow and stock perspective in the years of 2000-2017 as well as to define the causes of differences in the development of global imbalances in both of the analysed aspects. In order to achieve the objective, current account balances and international investment positions that are systemically significant to economies were analysed with the use of descriptive statistics techniques and specific analytical indicators. From the conducted studies it arises that after the outbreak of the global financial crisis, the global flow imbalance declined, whereas the global stock imbalance rose significantly. The demonstrated divergence was caused by insufficient changes in current account balances (flow imbalances) in order to cause a decrease in net international investment positions (stock imbalances) systematically significant to economies and by a weakened impact of the transactions registered in the balance of payment (flows) on the change of an international investment position (stock).

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Perspectives on the U.S. Current Account Deficit and Sustainability

The Journal of Economic Perspectives ◽

10.1257/089533002760278758 ◽

2002 ◽

Vol 16 (3) ◽

pp. 131-152 ◽

Cited By ~ 105

Author(s):

Catherine L Mann

Keyword(s):

Interest Rates ◽

Current Account ◽

Global Economy ◽

Current Account Deficit ◽

International Investment ◽

Capital Inflows ◽

Foreign Capital Inflows ◽

International Investment Position ◽

A Current ◽

The U.S

This essay considers the underpinnings of the large U.S. current account deficit. It then tackles the question of whether the U.S. current account deficit is sustainable. A current account deficit is “sustainable” at a point in time if neither it, nor the associated foreign capital inflows, nor the negative net international investment position are large enough to induce significant changes in economic variables, such as consumption or investment or interest rates or exchange rates. Even if the current account deficit is sustainable by this definition today, its trajectory could still be creating future risks for the U.S. and global economy.

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