Events at CERGE-EI

Thursday, 21 April, 2022 | 17:30 | Macro Research Seminar | ONLINE

Jonathan Heathcote (Federal Reserve Bank of Minneapolis) "The End of Privilege: A Reexamination of the Net Foreign Asset Position of the United States"

Jonathan Heathcote, Ph.D.

Federal Reserve Bank of Minneapolis

Join at Zoom: https://cuni-cz.zoom.us/j/99333230520?pwd=cU90b0I4WmRNMkFIbnZlMzM2VlpFUT09
                       Meeting ID: 993 3323 0520
                       Passcode: 461818


Authors: Jonathan Heathcote, Andrew Atkeson and Fabrizio Perri

Abstract: The US net foreign asset position has deteriorated sharply since 2007 and is currently negative 65 percent of US GDP. This deterioration primarily reflects changes in the relative values of large gross international equity positions, as opposed to net new borrowing. In particular, a sharp increase in equity prices that has been US-specific has inflated the value of US foreign liabilities. We develop an international macro finance model to interpret these trends, and we argue that the rise in equity prices in the United States likely reflects rising profitability of domestic firms rather than a substantial accumulation of unmeasured capital by those firms. Under that interpretation, the revaluation effects that have driven down the US net foreign asset position are associated with large, unanticipated transfers of US output to foreign investors.

JEL Classification: F30,F40
Keywords: Current account, Global Imbalances, Markups

Full Text: The End of Privilege: A Reexamination of the Net Foreign Asset Position of the United States