The Valuation of Hidden Assets in Foreign Transactions: Why “Dark Matter” Matters
It Is More Important Than Is Sometimes Thought
By Ricardo Hausmann and Federico Sturzenegger
Ricardo Hausmann is director of Harvard's Center for International Development and professor of the Practice of Economic Development at the Kennedy School of Government. Previously, he was chief economist of the Inter- American Development Bank, Minister of Planning of Venezuela, and a member of the Board of the Central Bank of Venezuela. He was the chair of the IMF-World Bank Development Committee and economics professor at the Instituto de Estudios Superiores de Administracion (IESA) in Caracas. He holds a PhD in economics from Cornell University.
Federico Sturzenegger is a visiting professor of public policy at the Kennedy School of Government of Harvard University and a professor at Universidad Torcuato Di Tella in Argentina. He has held positions as an assistant professor of economics at UCLA, chief economist of YPF S.A., Dean of the Business School at Universidad Torcuato Di Tella, and Secretary of Economic Policy of the Republic of Argentina. He is a consultant to corporations and international organizations. He holds a Ph.D. in Economics from MIT. In 2005, the World Economic Forum of Davos selected him as one of its Young Global Leaders.
This paper clarifies how the valuation of hidden assets— what we call “dark matter”—changes our assessment of the U.S. external imbalance. Dark matter assets are defined as the capitalized value of the return privilege obtained by U.S. assets. Because this return privilege has been steady over recent decades, it is likely to persist in the future or even to increase, as it becomes leveraged by an increasingly globalized world. Once this is included in future projections of U.S. current accounts, the U.S. external position looks much more balanced than depicted in official statistics.
By Ricardo Hausmann and Federico Sturzenegger
Federico Sturzenegger is a visiting professor of public policy at the Kennedy School of Government of Harvard University and a professor at Universidad Torcuato Di Tella in Argentina. He has held positions as an assistant professor of economics at UCLA, chief economist of YPF S.A., Dean of the Business School at Universidad Torcuato Di Tella, and Secretary of Economic Policy of the Republic of Argentina. He is a consultant to corporations and international organizations. He holds a Ph.D. in Economics from MIT. In 2005, the World Economic Forum of Davos selected him as one of its Young Global Leaders.