Current account deficits and long-term interest rates: is there a risk premium?

One of the dominant economic themes of the 1980s was the USA's persistent current account deficit. This deficit had, of course, its counterpart in a capital account surplus -borrowing from the rest of the world. Observers, whether academic economists, market operators or press commentators, repeatedly questioned whether the situation could continue. Would world investors (in the financial sense) grow weary, or at least wary, of putting their funds into US securities, with the result that the dollar would collapse in the foreign exchange markets and/or US interest rates would have to rise to exorbitant levels to persuade the world to keep buying US paper?
The current account deficits have continued but by the time of writing, at least, the catastrophe has not happened. The dollar has moved down at times but also up at times, so that exchange rates against other currencies cannot be said to have collapsed. Interest rates, meanwhile, do not show a risk premium which is visible, as it were, to the naked eye.
However, that is not necessarily to say that no risk premium exists. This paper reports an attempt to determine whether there is such a risk premium on US hands and also for the sake of comparison, on those of the UK, France and Germany (Federal Republic). For reasons which will be made clear below, we concentrate on long-term bonds.
The results suggest that, a risk premium related to current account deficits exists for the USA, but there appears to be no evidence of a risk premium for the other countries. A suggestion is offered as to why this may be so.
The results can be seen in terms of the ultra-familiar, textbook IS-LM-BP model. The implication of a risk premium on current account deficits is that the BP curve is upward-sloping. In the absence of such a premium, it is flat.
The paper is organized as follows: Section II summarizes the development of the relevant theory; Section III explains the method of investigation and... [ABSTRACT FROM AUTHOR]