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Quarterly Journal of Economics Vol. 123 No. 4 2008

Cross-Border Returns Differentials*

Stephanie E. Curcuru1,2; TOMÁŠ DVOŘÁK; Francis E. Warnock3,4,5,6

1 Federal Reserve · 2 Federal Reserve Board of Governors · 3 National Bureau of Economic Research · 4 Trinity College Dublin · 5 University of Virginia · 6 Federal Reserve Bank of Dallas

Abstract

Using a monthly data set on the foreign equity and bond portfolios of U.S. investors and the U.S. equity and bond portfolios of foreign investors, we find that the returns differential for portfolio securities is far smaller than previously reported. Examining all U.S. claims and liabilities, we find that previous estimates of large differentials are biased upward. The bias owes to computing implied returns from an internally inconsistent data set of revised data; original data produce a much smaller differential. We also attempt to reconcile our findings with observed patterns of cumulated current account deficits, the net international investment position, and the net income balance. Overall, we find no evidence that the United States can count on earning substantially more on its claims than it pays on its liabilities.

DOI
10.1162/qjec.2008.123.4.1495
Volume
123
Issue
4
Pages
1495-1530
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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