What expenditure does Anglosphere foreign borrowing fund? |
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| Institution: | 1. Economics, Griffith Business School, Griffith University, Gold Coast 4222, Australia;2. Center for Financial Econometrics, School of Accounting, Economics and Finance, Deakin University, Burwood 3125, Australia;3. School of Economics, Finance and Marketing, RMIT University, Australia;1. Department of Applied Economics, University of the Balearic Islands, Edifici Gaspar Melchor de Jovellanos Cra. de Valldemossa, km 7.5. Palma 07122, Spain;2. Maastricht University, School of Business and Economics, Department of Quantitative Economics, P.O. Box 616, 6200 MD Maastricht, The Netherlands;1. Department of Radiology, Virginia Mason Medical Center, Seattle, WA;2. Department of Radiology, University of Missouri-Kansas City, Kansas City, MO;3. Department of Pulmonary Medicine, MD Anderson Cancer Center, Houston, TX;4. Department of Radiology, University of Wisconsin School of Medicine and Public Health, Madison, WI;1. Instituto de Investigaciones Filosóficas, Universidad Nacional Autónoma de México, Mexico City, Mexico;2. Instituto de Ciencias Nucleares, Universidad Nacional Autónoma de México, Mexico City, Mexico |
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| Abstract: | This paper examines the extent to which foreign borrowing funds private investment, consumption and government expenditure in the United States, the United Kingdom, Australia, and New Zealand (the Anglosphere), advanced economies which have been the world's largest international borrowers since 1990. Using a bivariate predictive regression model, we estimate the relative importance of these expenditure aggregates as predictors of their external deficits, and hence foreign borrowing. Overall, based on quarterly macroeconomic data for the period 1990–2011, the evidence suggests that foreign borrowing has not financed higher household consumption in these economies over recent decades, with the possible exception of the United States. While results concerning government spending are mixed due to policy reaction, business cycle and public-private saving offset effects, strong results for private investment augur well for the sustainability of this grouping's foreign borrowing. |
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| Keywords: | Expenditure Current account deficits Foreign borrowing Anglosphere economies F32 F41 F47 |
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