Financing of Global Imbalances / Maria Teresa Punzi, W. Christopher Walker.

Format:

Book

Government document

Author/Creator:

Punzi, Maria Teresa.

Contributor:

Walker, W. Christopher.

International Monetary Fund. Monetary and Capital Markets Department.

Series:

IMF Working Papers; Working Paper ; No. 2007/177

IMF Working Papers

Language:

English

Subjects (All):

Balance of payments--United States--Econometric models.

Balance of payments.

Bonds--United States--Econometric models.

Bonds.

Capital movements--United States--Econometric models.

Capital movements.

Interest rates--United States--Econometric models.

Interest rates.

Physical Description:

1 online resource (23 p.)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2007.

Language Note:

English

Summary:

This paper analyzes the determinants of bond flows, now the dominant source of capital inflows, into the United States, as a means of establishing conditions affecting the financing of the U.S. current account deficit. To test the hypothesis that capital flows have become more responsive to changes in relative interest rates and other conditions across borders, a panel data set, showing bond flows from 12 separate jurisdictions into the United States, is constructed for the period 1994-2006 using adjusted U.S. Treasury International Capital Flow (TIC) data. Panel vector autoregression and instrumental variables approaches are used to estimate the impact of changes in interest rate differentials and other fundamentals on capital flows into the U.S. The paper finds evidence for an impact from interest rate differentials to bond inflows that 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.

Contents:

Contents; I. Introduction; II. Literature Survey; A. Home Bias; Figures; 1. Sources of Financing for the U.S. Current Account Deficit; B. Determinants of Equity Flows; C. Fixed Income Flows and Bond Yields; III. Theoretical Model; IV. Data; 2. Japan - Holdings of Long-Term U.S. Bond Debt; V. Empirical Estimation; Tables; 1. Summary Statistics for Period 1 Data (1/95-12/01); 2. Summary Statistics for Period 2 Data (1/02-4/06); 3. Correlations Between Interest Spreads and Exchange Rate Expectations; VI. Identification Issues; VII. Panel Instrumental Variable Estimates

4. Pooled Two-Stage Least Squares Regressions5. Fixed Effects Two-Stage Least Squares Regressions; VIII. Panel VARs and Impulse Response Functions; 6. "Partial Fixed Effects" 2SLS Regressions; 7. Correlation Coefficients and Std Dev of Residuals from Pd 2 VAR; IX. Conclusion; 3. Impulse Response Functions; Appendix; Panel Estimates Without Instrumental Variables

Notes:

"July 2007".

Includes bibliographical references.

Description based on print version record.

ISBN:

9786613825599

9781462342709

1462342701

9781452703701

1452703701

9781283513142

1283513145

9781451911947

1451911947