98 Fed. Res. Bull. 1 (2012)

handle is hein.journals/fedred98 and id is 1 raw text is: ´╗┐Federal Reserve
BULLETIN                                                       Vo.9,N.1 =                   OY
Board of Governors of the Federal Reserve System www.federalreserve.gov of
Improving the Measurement of Cross-Border                                            ?      RE
Securities Holdings: The Treasury International
Capital SLT
Erika Brandner, Fang Cai, and Ruth Judson, of the Division of International Finance,
prepared this article. Hugh Montag provided research assistance.
Understanding and accurately measuring cross-border financial flows and positions has
long been important for analysis of portfolio exposures, but the significance of these meas-
ures has intensified since the onset of the financial crisis in late 2007, when patterns of
cross-border flows changed dramatically.' In the United States, the system for measuring
cross-border security investment has to this point consisted of annual surveys that measure
securities positions and monthly reports that measure transactions in securities collected
through the Treasury International Capital (TIC) reporting system.2 During the crisis, esti-
mated cross-border positions based on the more timely transactions data collected on the
TIC S form were imperfect and in some cases misleading; in these cases, the more compre-
hensive survey data later revealed different patterns that would have improved understand-
ing of vulnerabilities had they been known sooner. In the wake of the crisis, interest in
improving the measurement of cross-border securities positions and flows was a chief
motivation for the introduction of a new TIC reporting form for collecting monthly aggre-
gate cross-border securities position data, the TIC SLT, for which the first wave of data was
released on May 15, 2012.3 This article reviews the general structure of cross-border posi-
tion and flow data, the benefits that the new SLT can provide, and the incoming infor-
mation from the first two reporting months of SLT data, September and December 2011.
While some patterns and characteristics of the SLT data will only become clear over time,
the SLT data have already begun to provide insights on U.S. and foreign cross-border
investment flows that are different from the monthly estimates based on existing flow data.
Cross-border financial flows are the other side of current account transactions, or trade in
goods and services: When goods or services are bought by one country, the cost of the
items acquired must, on net, be covered either by a corresponding sale of goods or services
or by financial inflows, or sales of financial assets. For the United States, which has run a
current account deficit for about two decades, measurements and analysis of cross-border
financial flows and positions is vital for understanding the sustainability of the U.S. current
account deficit.
Cross-border financial flows occur mainly in the form of purchases and sales of securities,
lending to banks and firms, and direct investment. The first two types of activity are moni-
tored through the TIC reporting system; the third, direct investment, which we will not

1 See Bertaut and Pounder (2009).
2 TIC data, documentation, and forms are available at www.treas.gov/tic.
SLT is an abbreviation for Securities Long Term. The form's title is Aggregate Holdings of Long-Term
Securities by U.S. and Foreign Residents.

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