By William Cline
ISBN-10: 0881323993
ISBN-13: 9780881323993
The us has once more entered right into a interval of huge exterior imbalances. This time the present account deficit, at approximately 6 percentage of GDP in 2004, is far higher than within the final episode, while the deficit peaked at approximately 3.5 percentage of GDP in 1987. furthermore, the deficit is on course to turn into considerably higher over the following numerous years. This learn examines no matter if the massive and transforming into present account deficit is an issue, and if that is so, how the matter may be solved. A imperative coverage end of this examine is that it truly is more and more very important that the U.S. decrease its exterior present account deficit. This deficit isn't any longer benign because it arguably used to be within the past due Nineteen Nineties whilst it was once financing excessive funding rather than excessive intake and massive executive dissaving.
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Extra resources for The United States as a Debtor Nation: Risks and Policy Reform
Sample text
1 in each of six subperiods since 1970. The table is based on annual data, assigning 1 to young debtor, 2 to mature debtor, 3 to young creditor, and 4 to mature creditor. The average status in each period is simply the numerical average for the years in question, and the numerical entry can appropriately be rounded off to arrive at the group in which the country belongs on average during that period. 67, which rounds to 2 and places the country as a mature debtor in that period. 2 shades the country periods for creditors.
When the estimated $1 trillion in ‘‘missing’’ external assets at the end of 2003 is allocated across the debtor-status countries, not a single industrial-country debtor is shifted into net asset status. 9 trillion, not enough to change the qualitative accounting diagnosis of net debtor. 11 Annual change in NIIP and growth rate (percent of GDP and percent) average change NIIP/GDP 7 6 NW2 SZ2 5 4 BL2 3 JP2 2 FR2 GE1 NW1 IT2 SZ1 UK2 IT1 NL1 GE2 AT1 UK1 FR1 AT2 US2 US1 BL1 1 0 –1 –2 –3 –4 GR1 –5 0 1 2 GR2 PT2 NL2 JP1 PT1 3 4 5 GDP growth Sources: World Bank (2004a), author’s calculations.
For many countries, both sides of the balance sheet show large stock values, and the difference between them is modest in comparison. One implication is that there can be large proportionate changes in the NIIP from relatively moderate changes (including solely from valuation effects) in gross assets and/or gross liabilities. 1 shows the importance of considering both the gross and net international investment positions. For the United States, gross external assets by 2003 were substantial at about 75 percent of GDP, but gross external liabilities were even higher at 97 percent, leaving an NIIP of �22 percent of GDP.
The United States as a Debtor Nation: Risks and Policy Reform by William Cline
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