Current Issues in Economics and Finance

The Impact of Exchange Rate Movements on U.S. Foreign Debt

January 2003 Volume 9, Number 1
JEL classification: F31, F36, F32

Author: Cédric Tille

In 2001, the United States' net debt to the rest of the world jumped to $2.3 trillion, a level double that recorded in 1999. Much of the increase reflects the new borrowing undertaken by the country to finance its mounting current account deficit. A third of the change, however, can be traced to a simple accounting effect—the impact of a rising dollar on the value of U.S. assets held abroad.

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