European Parliament Library

How Might a Disorderly Resolution of Global Imbalances Affect Global Wealth?, Francis Warnock

Partly reflecting structural advantages such a liquidity and strong investor protection, foreigners have built up extremely large positions in U.S. (as well as other dollar-denominated) financial assets. This paper describes the impact on global wealth of an unanticipated shock to U.S. financial markets. For every 10 percent decline in the dollar, U.S. equity markets, and U.S. bond markets, total wealth losses to foreigners could amount to about 5 percentage points of foreign GDP. Four stylized facts emerge: (i) foreign countries, particularly emerging markets, are more exposed to U.S. bonds than U.S. equities; (ii) U.S. exposure has increased for most countries; (iii) on average, U.S. asset holdings of developed countries and emerging markets (scaled by GDP) are very similar; and (iv) based on their reserve positions, wealth losses of emerging market governments could, on average, amount to about 2¾ percentage points of their GDP
Table Of Contents
""Contents""; ""I. INTRODUCTION""; ""II. EXPOSURE TO LONG- TERM U. S. SECURITIES""; ""A. Foreign Positions in U.S. Securities in 2004""; ""B. Impact of Declines in the Dollar and U.S. Asset Prices""; ""C. Evolution of Exposure: 1994 to 2004""; ""D. Exposure to Dollar Bonds Issued by Third Countries""; ""III. ANOTHER VIEW OF EXPOSURE IN 2004: U.S. LIABILITIES IMPLIED BY CPIS DATA""; ""A. CPIS Data""; ""B. CPIS Data: Implied U.S. Liabilities and Impact of U.S. Financial Market Shocks""; ""IV. CONCLUSION""; ""References""
Literary Form
non fiction
"July 2006 "
Physical Description
1 online resource (28 p.)
Specific Material Designation
Form Of Item

Library Locations

  • EP Library Strasbourg

    7 Place Adrien Zeller, Allée du Printemps, Strasbourg, F-67070, FR
  • EP Library Brussels

    60 rue Wiertz, Brussels, B-1047, BE
  • EP Library Luxembourg

    Rue du Fort Thüngen, Luxembourg, L-1313, LU