Just as a quick answer, we have put assumptions into the Greenbook about the size of those capital flows, as a financing of our deficit. They don’t influence the current account because the earnings on U.S. investments abroad are booked as occurring on a flow basis—when they happen—whether they are repatriated or not. So the repatriation in light of this special tax break that will ultimately expire would be a financing flow, not a change to the current account. And probably the numbers are big enough to be meaningful but not huge, not dominant.
What we don’t know—probably can’t know—is the extent to which the flows back to this country are already in dollars in some sense. Are they earned in dollars or are they transferred into dollars over some long period of time? If they are sort of sitting there waiting to come back in dollars, they wouldn’t have any particular role in explaining, say, the run-up in the dollar over the last six months or so. Without very disaggregated data, we can’t really tell that. And the turnover in the
December 13, 2005 20 of 100 exchange market is so huge that numbers on the order of magnitude that this tax break involved would never show up as a sudden outlier in a particular month, or something of that sort. We’ve put something in there as an assumption, and it’s probably a piece of the story. It’s providing a little bit of extra ease in financing the current account deficit right now and is, therefore, a bit of support for the dollar. But I wouldn’t think it is a dominant factor.