Macro Weeks 1-3 Global Imbalances, Current Account Sustainability,

Goods Balance

Exports of Goods = Export of Goods - Import of Goods

Service Balance

Exports of Services - Import of services

Income Balance

Net Investment Income + Net International Payments to Employees

Net Unilateral transfers

Private Remittances + Government Transfers

CA

TB + Income Balance + Net Unilateral Transfers

Global Imbalances

some countries run CA deficits while others run surplus

Net International Investment position

foreign assets - foreign liabilities

change in NIIP

CA + Valuation Changes

Hypothetical NIIP

NIIP without valuation changes

Negativ NIIP Positive Paradox

even with negative NIIP, the US made positive amount of net investment income

Dark Matter Explanation

True NIIP different to the measured NIIP

Return Differentials

return of assests - return on liabilities

Law of Motion

B*t = (1 + r - ar)B*t-1

Traversiality

Lim BT/(1+r)T = 0

Balance of Payments

the balance of payments is 0