## Where Did All the Borrowing Go? A Forensic Analysis of the U.S. External Position

_IMF Working Papers, February 1, 2008_

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## Bibliographic details
- Authors: Gian M Milesi-Ferretti, Philip R. Lane
- Published: February 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451868906.001

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### Summary
- Authors: Gian M Milesi-Ferretti, Philip R. Lane
- Publication date: February 1, 2008
- Core question: Why has the deterioration in the U.S. net external position been much smaller than the extensive net borrowing implied by large current account deficits?
- Scope: Examines the sources of discrepancies between net borrowing and accumulation of net liabilities for the U.S. economy over the past 25 years.
- Pages: 35
- Series: Working Paper No. 2008/028
- Volume: 2008
- Issue: 028
- DOI: https://doi.org/10.5089/9781451868906.001
- Stock No: WPIEA2008028
- ISBN: 9781451868906
- ISSN: 1018-5941

### Key findings and quantified contributions
- Net capital gains on the U.S. external portfolio play a major role in explaining why the U.S. net external position deteriorated much less than net borrowing would suggest.
- "Residual adjustments" are identified and quantified as an important component that helps reconcile net borrowing with changes in measured net liabilities.
- The analysis covers a 25 year period and attributes the discrepancy primarily to:
  - Net capital gains on U.S. external assets and liabilities.
  - Residual adjustments that offset measured financial flows and valuation changes.

### Analysis of residual adjustments
- The paper discusses whether residual adjustments originate from:
  - Measurement errors in external assets and liabilities.
  - Measurement errors in financial flows.
  - Measurement errors in capital gains.
- It explores implications of each conjecture for:
  - The U.S. financial account.
  - The U.S. external position.

### Subject areas and keywords
- Subject: Asset valuation, External position, Foreign assets, Foreign direct investment, Stocks
- Keywords: exchange rate, market value, net capital, rate of return, WP

### Implications highlighted
- If net capital gains are the dominant explanation, changes in valuation and rates of return are central to understanding the external position dynamics.
- If residual adjustments reflect measurement errors in stocks, flows, or valuation, then data and statistical practices for the U.S. external accounts may require review to improve consistency between borrowing and balance-sheet outcomes.
- The paper's conclusions bear directly on interpretation of the U.S. financial account and on assessments of external vulnerability.

*IMF Working Paper. Gian M Milesi-Ferretti and Philip R. Lane, "Where Did All the Borrowing Go? A Forensic Analysis of the U.S. External Position", Working Paper No. 2008/028, February 1, 2008.*

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