Found 413 article(s) in category 'Q3: Financial Crisis?'

The Valuation of Hidden Assets in Foreign Transactions: Why “Dark Matter” Matters

The Valuation of Hidden Assets in Foreign Transactions: Why “Dark Matter” Matters. Ricardo Hausmann, May 27, 2007, Paper. “This paper clarifies how the valuation of hidden assets—what we call “dark matter”—changes our assessment of the U.S. external imbalance. Dark matter assets are defined as the capitalized value of the return privilege obtained by U.S. assets. Because this return privilege has been steady over recent decades, it is likely to persist in the future or even to increase, as it becomes leveraged by…”  May require purchase or user account. Link

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Efficient Expropriation: Sustainable Fiscal Policy in a Small Open Economy

Efficient Expropriation: Sustainable Fiscal Policy in a Small Open Economy, By Aguiar, Mark, Manuel Amador, and Gita Gopinath. 2006

We study a small open economy characterized by two empirically important frictions – incomplete financial markets and an inability of the government to commit to policy. We characterize the best sustainable fiscal policy and show that it can amplify and prolong shocks to output. In particular, even when the government is completely benevolent, the government’s credibility not to expropriate capital endogenously varies with the state of the economy and may be “scarcest” during recessions. This increased threat of expropriation depresses investment, prolonging downturns. It is the incompleteness of financial markets and lack of commitment that generate investment cycles even in an environment where first best capital stock is constant. Link

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Why the US Current Account Deficit is Sustainable

Why the US Current Account Deficit is Sustainable. Ricardo Hausmann, May 27, 2006, Paper. “Over the last couple of years, the burgeoning of the US current account deficit, reaching $792 billion in 2005 alone, has led to significant concerns about the future of the United States and the possibility of a major global crisis. With a brief respite in 1991, it comes after twenty-four years of unbroken deficits, which have totalled over $5.2 trillion. According to some doomsayers, once the massive financing required to continue paying for such a widening gap dries up…” May require purchase or user account. Link

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