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1 THE FINANCIAL ROLE OF EAST ASIAN COUNTRIES IN GLOBAL IMBALANCES: AN ECONOMETRIC ASSESSMENT OF DEVELOPMENTS AFTER THE GLOBAL FINANCIAL CRISIS  / 2013 /  Global Journal of Economics  / vol.02, no.02, pp.1350006 / 

10.1142/S2251361213500067

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East Asian Economic Review Vol. 15, No. 2, 2011. pp. 83-111.

DOI https://dx.doi.org/10.11644/KIEP.JEAI.2011.15.2.231

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Investigation of Global Imbalances Based on a Gravity Model

Author

Hyun-Hoon Lee

Kangwon National University

hhlee@kangwon.ac.kr
Creative Commons Attribution License

EAER is an open access journal distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license.

Abstract

Using the US Treasury International Capital (TIC) data, this paper attempts to analyze the size and trend of foreign investment in the U.S. in the form of equities, bonds and bank lending during the period of 2001-2007. In addition, this paper assesses the determinants of foreign investment in the U.S., using the financial gravity model which includes an East Asian dummy as an explanatory variable. The results show that most East Asian countries have invested more in the U.S. than the optimal level suggested by the gravity model. Such an over-investment is more evident in long-term bond investment than in equity investment or bank lending. Thus, the results confirm that global imbalance does exist between East Asian countries and the U.S.

JEL classification: F10, F21, F42

Keywords

Global Imbalances, Cross-border Capital Movement, East Asia, United States, Gravity Model

Language

Korean

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