Theses and Dissertations - UTB/UTPA

Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

Dr. Andre V. Mollick

Second Advisor

Dr. Cynthia Brown

Third Advisor

Dr. Jose Pagan


The United States has been running, for a long time now, an-increasing current account deficit. In fact, the U.S. has a current account deficit with most countries in the world. The implication is that Americans have been enjoying an ever-increasing standard of living by consuming way more than what they produce, not only manufactured goods, but also important commodities such as oil. In other words, a significant fraction of our prosperity is based on borrowing rather than increased production. These persistent deficits, which translate into additional indebtedness by the U.S. and an-ever increasing amount of dollars reserves by countries such as China, Japan, South Korea and others, have damaging economic consequences in the long-run. Historically, studies concerning transmission of financial shocks have been unidirectional, going from the U.S. to other nations or regions of the world. However, conditions are now ripe to investigate how this remarkable amount of financial flows reverting to the United States from these “surplus” countries impacts the U.S. financial markets. This dissertation explores the effects of reverting financial flows using financial modeling and forecasting as a research design platform to shed light on three specific issues: (1) the impact of Chinese purchases of U.S. Treasury securities on the U.S. Treasury Yield Curve, (2) the impact of foreign purchases of U.S. corporations’ stocks on the U.S. stock market, and (3) the impact of recent oil and other macroeconomic shocks on the U.S. dollar exchange rates. This study finds support for the notion that the decision of China to invest a considerable portion of their positive net cash flow from trade and foreign investments directly into the U.S. Treasury securities has a significant lowering and flattening effect on the U.S Treasury Yield Curve. The study also finds that there exists a short-run as well as a long-run positive and significant relationship between the U.S. stock market and net purchases of U.S. stock by foreign investors. Finally, the study finds that oil price shocks significantly contribute to the explanation of movements in the value of the U.S. dollar relative to key currencies of net oil exporters and other widely traded currencies.


Copyright 2009 Radhamés A. Lizardo. All Rights Reserved.

Granting Institution

University of Texas-Pan American

Included in

Economics Commons