Comparative Analysis of the Return on Foreign Investments of the United States, Germany and Japan
DOI:
https://doi.org/10.14666/2194-7759-9-2-002Keywords:
international capital flows, return on investment, public debt, yield of government securities.Abstract
This research paper aims to analyze the return on foreign outward and inward investments of the United States, Germany and Japan. For all of the three countries the cumulative inflows of the financial account from inward direct, portfolio and other investments significantly exceed the income outflow. At the same time, the amount of income received by the United States exceeds the amount of investment abroad. Due to the fact that the profitability of outward investments for the US, Japan and Germany exceeds the return on inward investments it can be concluded that participation of these countries in international investments has a positive effect on their balance of payments. In the countries that are partners of the United States, Japan and Germany the opposite effect is observed. The results of the study indicate that in 2020 due to the financial stimulation of the social-economic development in the conditions of the coronavirus pandemic the sharp increase of the level of public debt to GDP in the US, Japan and Germany has not yet affected significantly the yield of government securities. However, if the current expansionary fiscal policies of the United States and Japan are continued, countries may face substantial problems in servicing their public debt. In such a situation the Central Bank of Japan and the US Federal Reserve System will be forced to keep the discount rate at almost zero for a long time, fearing a sharp rise in the cost of servicing public debt.
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