Decomposing the U.S. External Returns Differential

Curcuru, Stephanie E.; Dvořák, Tomáš; Warnock, Francis E.

doi:10.3386/w15077

Cited by 18 publications

(41 citation statements)

References 14 publications

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“…The necessary steps are in detail described in Bertaut and Tryon (2007) and Bertaut and Judson (2014). the literature to study foreign portfolio flows into U.S. securities and U.S. flows into foreign securities and considered as highly accurate (see, for instance, Curcuru et al, 2010, or Hanlon et al, 2015.…”

Section: Datamentioning

confidence: 99%

Spillovers of U.S. unconventional monetary policy to emerging markets: The role of capital flows

Anaya

Hachula

Offermanns

2017

Journal of International Money and Finance

138

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. it is transmitted through portfolio flows. We find that a U.S. UMP shock significantly increases portfolio flows from the U.S. to EMEs for almost two quarters. The rise in inflows is accompanied by a persistent increase in several real and financial variables in EMEs. Terms of use: Documents inMoreover, we find that, on average, EMEs reacted with an easing of their own monetary policy stance in response to an expansionary U.S. shock.JEL Classification: C54, E52, F42.

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Section: Datamentioning

confidence: 99%

Spillovers of U.S. unconventional monetary policy to emerging markets: The role of capital flows

Anaya

Hachula

Offermanns

2017

Journal of International Money and Finance

138

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“…However, Curcuru, Dvorak, and Warnock (2008) find that the US external assets do not necessarily yield higher returns than its liabilities, suggesting that the effect of returns differentials might be small. We consider that their results might not be suitable for our model for the following reasons.…”

Section: Related Literaturesmentioning

confidence: 89%

“…These papers are certainly related to this strand of research. Furthermore, Curcuru, Dvorak, and Warnock (2010) and Curcuru, Thomas, Warnock, and Wongswan (2011) provide evidence that US investors may be better than foreign investors at choosing country composition in their portfolios. Their work can be regarded as evidence that US investors are endowed with better trading technologies, which can be incorporated into our model by increasing the fraction of US Mertonian traders.…”

Section: Related Literaturesmentioning

confidence: 99%

“…We consider that their results might not be suitable for our model for the following reasons. First, Curcuru, Dvorak, and Warnock (2008) only consider portfolio equity and debt securities and exclude the following types of assets: FDI, assets reported by nonbanking concerns, and assets reported by US banks and securities brokers. The omitted claims account for 60% of US external assets, and the omitted liabilities account for 50% of US external liabilities.…”

Section: Related Literaturesmentioning

confidence: 99%

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The Risk Premium and Long-Run Global Imbalances

Chien

Naknoi²

2012

SSRN Journal

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Our paper investigates whether the valuation effect caused by a large risk premium and a low risk-free rate can help to explain the enormous US current account and trade deficit observed in the past decade. To answer this question, we set up an endowment growth model in which investors are endowed with heterogeneous trading technologies. In our model, the average US investors load up more aggregate risk by investing in a risky asset abroad and issuing a risk-free asset. Thanks to the large risk premium as well as the low risk-free rate, the US can sustain a long-run trade deficit even as a debtor country. Quantitatively, we find that the valuation effect caused solely by the high risk premium and the low risk-free rate in our model, which is calibrated to match the external assets and liabilities of US economy, can account for more than half of the observed trade deficit and current account deficit. Our results suggest that the current US trade deficit might not necessarily lead to net export increases or dollar depreciation in the future.

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“…The portfolio data is consistent with the U.S. Treasury annual benchmark surveys. The data are considered to be of good quality and have recently been used by Curcuru et al (2008Curcuru et al ( , 2010 and Curcuru et al (2011) to analyze return differentials and the relationship between portfolio reallocations and past returns.…”

Section: Introductionmentioning

confidence: 99%

Gradual Portfolio Adjustment: Implications for Global Equity Portfolios and Returns

Bacchetta

Wincoop

2017

SSRN Journal

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Modern open economy macro models assume the continuous adjustment of international portfolio allocation. We introduce gradual portfolio adjustment into a global equity market model. Our approach differs from related literature in two key dimensions. First, the time interval between portfolio decisions is stochastic rather than fixed, leading to a smoother response to shocks. Second, rather than only considering asset returns, we also use data on portfolio shares to confront the model to the data. Conditional on reasonable risk aversion, we find that the data is consistent with infrequent portfolio decisions, with a frequency of at most once in 15 months on average.

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Decomposing the U.S. External Returns Differential

Cited by 18 publications

References 14 publications

Spillovers of U.S. unconventional monetary policy to emerging markets: The role of capital flows

Spillovers of U.S. unconventional monetary policy to emerging markets: The role of capital flows

The Risk Premium and Long-Run Global Imbalances

Gradual Portfolio Adjustment: Implications for Global Equity Portfolios and Returns

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