Exorbitant Privilege and Exorbitant Duty

We update and improve the Gourinchas and Rey (2007a) dataset of the historical evolution of US external assets and liabilities at market value since 1952 to include the recent crisis period. We find strong evidence of a sizeable excess return of gross assets over gross liabilities. The center country of the International Monetary System enjoys an gexorbitant privilegeh that significantly weakens its external constraint. In exchange for this gexorbitant privilegeh we document that the US provides insurance to the rest of the world, especially in times of global stress. This gexorbitant dutyh is the other side of the coin. During the 2007-2009 global financial crisis, payments from the US to the rest of the world amounted to 19 percent of US GDP. We present a stylized model that accounts for these facts.