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Bigger and bigger gross cross-border holdings result in greater swings within the NIIP to GDP ratio.
Determine 1: Web worldwide funding place to GDP ratio (blue, left scale), and nominal worth of US greenback in opposition to broad basket of currencies (tan, proper scale). NBER outlined peak-to-trough recession dates shaded grey. Supply: BEA, Federal Reserve by way of FRED, NBER, and creator’s calculations.
It’s because US belongings held overseas are denominated in overseas foreign money; expressing every little thing in US {dollars} incorporates these swings within the greenback’s alternate price to asset valuations.
For extra dialogue of the US NIIP, see this discussion of a CBO working paper.
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