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"Why are foreigners willing to invest almost $2 trillion per year in the United States? The answer affects if the existing pattern of global imbalances can persist and if the United States can continue to finance its current account deficit without a major change in asset prices and returns. This paper tests various hypotheses and finds that standard portfolio allocation models and diversification motives are poor predictors of foreign holdings of U.S. liabilities. Instead, foreigners hold greater shares of their investment portfolios in the United States if they have less developed financial markets. The magnitude of this effect decreases with income per capita. Countries with fewer capital controls and greater trade with the United States also invest more in U.S. equity and bond markets, and foreign investors "chase returns" in their purchases of U.S. equities (although not bonds). The empirical results showing a primary role of financial market development in driving foreign purchases of U.S. portfolio liabilities supports recent theoretical work on global imbalances"--National Bureau of Economic Research web site.
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Why do foreigners invest in the United States?
2008, National Bureau of Economic Research
Electronic resource
in English
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Book Details
Edition Notes
Title from PDF file as viewed on 6/25/2008.
Includes bibliographical references.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.
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- Created September 27, 2008
- 5 revisions
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December 22, 2020 | Edited by MARC Bot | import existing book |
July 31, 2012 | Edited by VacuumBot | Updated format '[electronic resource] /' to 'Electronic resource' |
December 15, 2009 | Edited by WorkBot | link works |
October 28, 2008 | Edited by ImportBot | Found a matching Library of Congress MARC record |
September 27, 2008 | Created by ImportBot | Imported from Library of Congress MARC record |