Foreign Investment in U.S. Securities

Given its relatively low savings rate, the U.S. economy depends heavily on foreign capital inflows from countries with high savings rates (such as China) to help promote growth and to fund the federal budget deficit. Thus, foreign central banks and government-owned investment funds have played an important role financing the US current account deficit over the past several years. As the US economy has slowed relative to the rest of the world in late 2006, reducing the attractiveness of US financial of US financial assets to private investors abroad, the share of the US external deficit financed by foreign central banks increased substantially. This book examines this increasing dependency of the U.S. economy on foreign investment.