Financing of Global Imbalances

IMF Working Papers, July 1, 2007

Source details

Analyzes determinants of bond flows, identified as the dominant source of capital inflows, into the United States.
Purpose: establish conditions affecting the financing of the U.S. current account deficit.
Hypothesis tested: capital flows have become more responsive to changes in relative interest rates and other conditions across borders.

Data:
- Panel data set showing bond flows from 12 separate jurisdictions into the United States.
- Period covered: 1994-2006.
- Source: adjusted U.S. Treasury International Capital Flow (TIC) data.
Methods:
- Panel vector autoregression.
- Instrumental variables approaches.
Publication details:
- Pages: 21
- Volume: 2007
- Issue: 177
- Series: Working Paper No. 2007/177
- DOI: https://doi.org/10.5089/9781451867411.001
- Stock No: WPIEA2007177
- ISBN: 9781451867411
- ISSN: 1018-5941
- Publication date listed: July 1, 2007
- Authors: Maria Teresa Punzi, W. Christopher Walker

Evidence that interest rate differentials have an impact on bond inflows into the United States.
The impact from interest rate differentials to bond inflows has increased over time.
Under one plausible set of theoretical assumptions, the increased sensitivity can be interpreted as resulting from a reduction in home bias on the part of non-US investors.

Subject: Bonds, Capital flows, Current account deficits, Exchange rates, Yield curve
Keywords: interest rate, WP

Disclaimer included in the source: "This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate."

Content derived from the IMF web page "Financing of Global Imbalances".