2 Several researchers have argued that capital flows from emerging markets to advanced economies will tend to be directed to the safest and most liquid assets, of which, these researchers argue, there is a relative shortage in emerging markets.
3 My paper confirms empirically that the global saving glut countries – principally, some emerging Asian economies and Middle Eastern oil exporters – did indeed evince a strong preference for very safe and liquid U.S. assets in the middle of the past decade, especially Treasury and agency securities.