That expansion coincided with a steady appreciation of the U.S. dollar in the late 1990s, suggesting that net demand for U.S. assets was an important factor driving the significant widening of the U.S. current account deficit.
As noted earlier, U.S. savers’ appetite for increasing the share of their portfolio devoted to foreign assets began to wane, and at roughly the same time capital account liberalization in other countries freed a large pool of savings to be invested internationally.