Abstract
The aim of this chapter is to estimate the “dark matter” assets in the external sector of the United States after the outbreak of the world economic crisis in 2009. The author conducts a statistical analysis using a time series on the balance of payments (BoP) and international investment position (IIP) data for the United States and a group of 19 developed economies. The study reveals that the United States is a privileged economy with respect to foreign income on international investments. The rates of return on its foreign assets are relatively higher, and the costs incurred on its foreign liabilities relatively lower, as compared with the benchmark group of developed countries. Based on prevailing income differentials substantial “dark matter” net assets in the external sector of the US economy are estimated. Consequently, the actual net IIP deviates significantly from that officially reported. Recognizing such “dark matter” leads to the conclusion that the United States is a foreign creditor, not a debtor.
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Notes
- 1.
- 2.
The benchmark group consists of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong SAR, Ireland, Israel, Japan, the Netherlands, New Zealand, Norway, Singapore, Sweden, Switzerland, and United Kingdom.
- 3.
These GDP criteria are met by 21 economies. However, Qatar and the United Arab Emirates are not included in the analysis due to lack of data.
- 4.
Occurring in all years of the analyzed time span.
- 5.
As returns on equity investments proved to be normally distributed (see Table 1) t-tests were applied to evaluate the difference between the means of returns in the United States and the benchmark group (see Table 3), with the Cochran–Cox adjustment if the assumption of homogeneity of variance is not met (see Table 2).
- 6.
As unfavorable income differentials for other investment assets of the United States can be observed, the author calculated the “dark matter” relating to other investment liabilities based on the net income differential, i.e., the cost savings on other investment liabilities reduced by the unfavorable income differential on other investment assets.
- 7.
The economists expected a sudden reversal in capital flows and depreciation of the US dollar. Such balance of payments crisis is characteristic for emerging markets (see Aysan et al. 2014). It worth to be noted that such fluctuations would increase the probability of shifting from the US dollar to the euro in international reserves of central banks (see Komijani and Tavakolian 2011). Other types of financial crisis are also widely discussed in the literature. For instance, for a discussion of banking crises see Diemer and Vollmer (2015).
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Sobanski, K. (2020). Estimation of “Dark Matter” in the External Sector of the United States After the Outbreak of the World Economic Crisis in 2009. In: Bilgin, M., Danis, H., Karabulut, G., Gözgor, G. (eds) Eurasian Economic Perspectives. Eurasian Studies in Business and Economics, vol 13/1. Springer, Cham. https://doi.org/10.1007/978-3-030-40375-1_17
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