CID Working Paper No. 137 :: The Implications of Dark Matter for Assessing the US External Imbalance by Ricardo Hausmann and Federico Sturzenegger :: Publications :: Center for International Development at Harvard University (CID)

CID Working Paper No. 137, November 2006

The Implications of Dark Matter for Assessing the US External Imbalance

Ricardo Hausmann and Federico Sturzenegger

Abstract

This paper clarifies how dark matter changes our assessment of the US external imbalance. Dark matter assets are defined as the capitalized value of the return privilege obtained by US assets. Because this return privilege has been steady over recent decades, it is likely to persist in the future or even to increase, as it becomes leveraged by an increasingly globalized world. Once this is included in future projections of US current accounts, the US external position looks much more balanced than depicted in official statistics.

Keywords: global imbalances, United States current account deficit, valuation problems, Foreign Direct Investment (FDI)

JEL codes: F32, F34, F36, F41

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