Current Issues in Economics and Finance

The Income Implications of Rising U.S. International Liabilities

December 2005Volume 11, Number 12
JEL classification: F32, F34

Authors: Matthew Higgins, Thomas Klitgaard, and CédricTille

Although the United States has seen its net liabilities surge in recent years, its investment income balance has remained positive—largely because U.S. firms operating abroad earn a higher rate of return than do foreign firms operating here. The continuing buildup in liabilities, however, should soon push the U.S. income balance below zero. In that event, net income flows will begin to boost the nation's current account deficit instead of reducing it.

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