- Global Imbalances or Bad Accounting? The Missing Dark Matter in the Wealth of Nations
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- by Hausmann, Ricardo; Sturzenegger, Federico
- This paper argues that current account statistics may provide a poor indication for the real
evolution of a country’s net foreign assets. This may be due to a series of factors including the
mismeasurement of FDI, unreported trade of insurance or liquidity services and debt relief.
Because of these problems we suggest estimating net foreign assets by capitalizing the net
investment income and then estimating the current account from the changes in this stock of
foreign assets. We call dark matter the difference between our measure of net foreign assets and
that portrayed by official statistics. We find dark matter to be important for many countries and
that it relates to FDI flows, domestic volatility, and debt relief. We also find that, once dark
matter is taken into account, global net asset positions appear to be relatively stable. In particular,
the exports of dark matter of the US appear to be fairly steady and large enough to keep the US
net asset position stable, casting doubts on the need for a major adjustment of the dollar or a
large rebalancing of the global economy.
- Publication Type: WCFIA Working Paper
- Published Date: September 2006
- Field of Interest: International Economics
- Hausmann, Ricardo, and Federico Sturzenegger. "Global Imbalances or Bad Accounting? The Missing Dark Matter in the Wealth of Nations." Working Paper 2008-0043, Weatherhead Center for International Affairs, Harvard University, January 2006. (Revised September 2006.)
- Also CID Working Paper No. 124.