Have US external imbalances been determined at home or abroad?

Anthony J. Makin, Paresh Kumar Narayan

Research output: Contribution to journalArticleResearchpeer-review

7 Citations (Scopus)


This paper examines the relationship between the United States saving-investment imbalance and long-term real interest rates using a new international borrowing and lending framework. It first establishes how domestic or international factors may primarily influence the US external imbalance and interest rates over any given time before showing that the current account and real long term interest rate share a positive and statistically significant co-integrating relationship based on data from the mid-1980's. The results suggest that while in the pre-Asian financial crisis period (1985:01-1996:04) US external deficits and long term interest rates were mainly determined by domestic factors, external factors beyond the control of domestic policymakers dominated from 1997:01-2004:04.

Original languageEnglish
Pages (from-to)520-531
Number of pages12
JournalEconomic Modelling
Issue number3
Publication statusPublished - May 2008
Externally publishedYes


  • Interest rates
  • International borrowing and lending
  • Investment
  • Saving

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