Technology capital and the US current account

Ellen R. McGrattan, Edward C. Prescott

Research output: Contribution to journalArticlepeer-review

61 Scopus citations


The US Bureau of Economic Analysis (BEA) estimates that the return on investments of foreign subsidiaries of US multinational companies over the period 1982-2006 averaged 9.4 percent annually after taxes; US subsidiaries of foreign multinationals averaged only 3.2 percent. BEA returns on foreign direct investment (FDI) are distorted because most intangible investments made by multinationals are expensed. We develop a multicountry general equilibrium model with an essential role for FDI and apply the BEA's methodology to construct economic statistics for the model economy. We estimate that mismeasurement of intangible investments accounts for over 60 percent of the difference in BEA returns.

Original languageEnglish (US)
Pages (from-to)1493-1522
Number of pages30
JournalAmerican Economic Review
Issue number4
StatePublished - Sep 2010


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