## Globalization, Gluts, Innovation or Irrationality: What Explains the Easy Financing of the U.S. Current Account Deficit?

_IMF Working Papers, July 1, 2007_

## Source details

**Canonical URL:** [Globalization, Gluts, Innovation or Irrationality: What Explains the Easy Financing of the U.S. Current Account Deficit?](https://www.imf.org/en/publications/wp/issues/2016/12/31/globalization-gluts-innovation-or-irrationality-what-explains-the-easy-financing-of-the-u-s-21118)

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## Bibliographic details
- Authors: Ravi Balakrishnan, Volodymyr Tulin, Tamim Bayoumi
- Published: July 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451867244.001

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### Research question and approach
- Examines the roles of:
  - U.S. financial innovation,
  - financial globalization, and
  - the savings glut hypothesis
  in explaining the rise in U.S. external debt.
- Methodology:
  - Portfolio balance model analysis.
  - Empirical analysis following the model.

### Key findings
- Financial deepening and falling home bias in industrialized countries explain a large share of external financing.
- The savings glut hypothesis (including difficult-to-track petrodollar recycling) is important in explaining external financing.
- U.S. financial innovation is also important, partly because it contributed to declining home bias in industrialized countries.
- These factors should be viewed as a constellation of forces that can be self-reinforcing rather than in isolation.

### Subjects and keywords
- Subjects: Bonds, Emerging and frontier financial markets, Foreign assets, Securities markets, Sovereign bonds
- Keywords: current account, fixed income, global bond, government bond, WP

### Notable metadata and logistics
- Format availability: More Formats on IMF eLibrary; Order a Print Copy (as listed on the source)
- Related programmatic links shown on the source: IMF Working Papers; United States and the IMF; Visit the IMF eLibrary; IMF Publications Newsletter

*Source: Globalization, Gluts, Innovation or Irrationality: What Explains the Easy Financing of the U.S. Current Account Deficit?, IMF Working Papers 2007/160, accessed via https://www.imf.org/en/publications/wp/issues/2016/12/31/globalization-gluts-innovation-or-irrationality-what-explains-the-easy-financing-of-the-u-s-21118*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/globalization-gluts-innovation-or-irrationality-what-explains-the-easy-financing-of-the-u-s-21118_