International Effects on the U.S. Capital Market

This paper presents evidence bearing on the question of international influences on the U.S. capital market. Both the examination of relative magnitudes of international asset holdings and the estimation of a simple partial-equilibrium capital market model indicate that such influences are potentially quite important. In particular, we find that the effects on international flows on the long-term new-issue corporate bond rate in the U.S. are highly significant. Since this interest rate is often seen as crucial in domestic investment decisions, the paper provides reason to believe that investment in the U.S. is significantly influenced by international capital transactions.