## _wp0669

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---

### Introduction and scope
- The External Wealth of Nations Mark II (EWN II) dataset covers the period 1970–2004.
- EWN II expands coverage to 145 countries in total, over twice as many countries as the initial contribution.
- The initial contribution (Lane and Milesi-Ferretti, 2001a) included estimates for the external portfolios of 67 countries over the period 1970–98.
- The dataset incorporates an extensively revised methodology and draws upon a richer range of data sources.

### Methodology (construction of the EWN II dataset)
- Core construction approach:
  - Blends direct national IIP estimates with cumulative-flow reconstruction and valuation adjustments using equation (1): updating holdings by prior stock, valuation changes, and net purchases.
  - Residence principle and BPM5 classification applied to categorize positions into: Portfolio investment (equity and debt securities), Foreign direct investment (equity participations above 10 percent), Other investment (loans, deposits, trade credits), Financial derivatives, and Reserve assets.
- Primary data sources and asset-specific approaches:
  - Portfolio equity: IIP (IFS/BOPS), CPIS, Frank Warnock–based bilateral U.S. Treasury estimates; market-value construction via cumulated flows with stock-market price indices (MSCI world index weighting assumption; for large domestic markets, world index excluding home country).
  - FDI: IIP estimates and UNCTAD World Investment Report; market-value series adjusted by stock indices; book-value series adjusted via cumulative U.S. dollar flows or real exchange rate adjustments.
  - Debt: IIP, World Bank Global Development Finance, IMF WEO, QEDS, CPIS (portfolio debt), BIS banking claims, IFS banking data, and national sources; valuation adjustments rely on currency composition of debt.
  - Financial derivatives: included when countries report outstanding market values.
  - Official reserves: IMF data on total reserves minus gold, supplemented by national sources.
- Additional construction notes:
  - Use of Sinn (1994) estimates and OECD (1972) to obtain initial 1970 (or later) values where necessary.
  - Measurement error treatment: cumulative net errors and omissions reported separately (not used systematically to force net positions); unrecorded flows, offshore intermediation, and complex financial structures identified as important sources of error.

### Dataset: scope and global coverage
- Coverage rules and sample:
  - Dataset covers 145 countries over 1970–2004, and reports data for the euro area as a whole.
  - Includes all countries with income above US$1 billion in 2000 (or US$2 billion in 2004).
  - Exceptions: the Bahamas, Barbados, the Netherlands Antilles, Iraq, and Afghanistan.
  - Complete span 1970–2004 available for 91 countries; a further 54 countries have shorter periods reported.
- Data classification:
  - Portfolio debt and other investment grouped as external debt assets and external debt liabilities in the dataset.
  - Decomposition between bonds and other investment available only for countries that report IIP.

### Selected empirical findings — scale of international financial integration
- Volume-based measure IFIGDP = (FA + FL)/GDP:
  - IFIGDP increased from 45 percent in 1970 to over 300 percent in 2004.
  - IFIGDP reached 100 percent in 1987; passed 200 percent in 1998; passed 300 percent in 2004.
  - Increase by a factor of 7 over 1970–2004.
- Phases and group differences:
  - Gradual increase in 1970s–1980s; acceleration in mid-1990s.
  - Emerging markets/developing countries tracked industrial countries until early 1990s; since then industrial countries accelerated faster.
- Equity-based integration (GEQGDP = (PEQA + FDIA + PEQL + FDIL)/GDP):
  - Industrial group: stable until 1985; gradual rise 1985–1995; rapid increase since 1996 except for 2001–02 equity valuation reversal.
  - Emerging markets/developing countries: strong growth in cross-border equity positions during the 1990s; equity integration grew relative to both GDP and trade.

### Selected empirical findings — trends in external capital structure
- Equity share in liabilities (EQSHARE_LIAB):
  - Industrial countries: decline in 1970s; increase in 1980s and 1990s; 2004 value fell to 36 percent.
  - Emerging markets/developing countries: continued increase; in 2004 equity liabilities accounted for half of total external liabilities.
  - FDI accounts for about 75 percent of developing countries’ equity liabilities.
- Debt and reserves for emerging markets/developing countries:
  - Aggregate external debt-to-exports ratio declined dramatically since the late 1980s.
  - Ratio of official reserves to total debt liabilities increased from 29 percent in 1998 to 64 percent in 2004.
  - Reserve holdings: in 1995 total holdings by both groups were over $700 billion; by 2004 emerging markets/developing countries’ total reserves (just under $2.5 trillion) exceed holdings in industrial countries by $900 billion.

### Selected empirical findings — net foreign asset (NFA) positions and valuation effects
- Cross-sectional relationships:
  - Correlation of NFA/GDP versus log GDP per capita is 0.45 (aggregate statement) and 0.43 in a scatter for all countries (2004) in figures.
  - Variation explained by GDP per capita: over 40 percent for industrial countries; less than 30 percent for emerging markets and developing countries.
- Aggregate time-series highlights (1980 onward):
  - United States: well-known deterioration in net external position.
  - Emerging markets/developing countries: dramatic aggregate improvement since late 1990s.
  - Other industrial countries: upward trend reversed since 2001, with deterioration in Spain, Italy, Australia, and the United Kingdom.
- Composition and cross-country portfolio profiles:
  - Industrial countries: no systemic cross-sectional relation between net debt and net equity (correlation 0.02); many industrial countries (including the United States and the United Kingdom) are long foreign equity and short foreign debt; Japan shows the opposite pattern.
  - Emerging markets/developing countries: positive relation between net debt and net equity (correlation 0.35); 71 developing countries have net liabilities in both debt and equity categories; 31 of 39 countries with positive net debt have negative net equity liabilities.
- Valuation channel:
  - Correlation between capital gains/losses (valuation) and current account contribution to changes in NFA declined over time:
    - Industrial group: from 0.71 in 1971–1981 to 0.33 in 1993–2004.
    - Selected emerging markets: from 0.72 to 0.47 over comparable periods.
  - Valuation effects increased in importance as gross external positions expanded, often generating larger short-term volatility in changes in NFA relative to the current account.
- Cumulative discrepancies and measurement issues:
  - World-level discrepancy: measured world external liabilities exceed assets; portfolio equity accounts for almost half of the world NFA discrepancy, with debt accounting for the remainder.
  - Large bilateral/CPIS-based mismatches: portfolio equity liabilities reported by Ireland, Luxembourg, and the United States substantially exceed holdings reported in these economies by CPIS-reporting countries — suggesting under-reporting of claims on these countries.
  - Net errors and omissions cumulative values (end-2004): substantial and concentrated (Switzerland largest receiver of unrecorded capital inflows; Russia, Norway, and Kuwait notable for unrecorded capital outflows of order 20 percent of GDP or more).

### Selected empirical tables and numeric highlights (preserve source figures exactly)
- Table 1 — Portfolio Equity Liabilities Reported By Destination, 2003 (Aggregate data, billions US$):
  - Ireland: 479151
  - Luxembourg: 1,143623
  - United States: 1,8271,274
- Table 2 — Bilateral holdings (selected entries, billions US$):
  - Holdings in the United States (reported by investor countries): Canada: 203152; Caribbean financial centers: 22724; Singapore: 737; Switzerland: 11952; United Kingdom: 229174
  - Holdings in Ireland (reported by investor countries): Japan: 153; United Kingdom: 13925; United States: 9522
- Table 3 — Evolution of Net Foreign Asset Positions: Regional means (NFA/Y), 1996 and 2004 (selected):
  - Industrial: Correlation 0.82; NFA/Y (1996) -0.9; (2004) -6.1; Difference -5.3
  - Africa: Correlation 0.80; NFA/Y (1996) -60.4; (2004) -43.8; Difference 16.6 (note period 1996-2003)
  - Asia: Correlation 0.91; NFA/Y (1996) -10.7; (2004) 17.9; Difference 28.6
  - Emerging Europe: Correlation 0.52; NFA/Y (1996) -24.2; (2004) -49.5; Difference -25.3 (period 1997-2004)
  - Middle East: Correlation 0.77; NFA/Y (1996) 21.3; (2004) 55.4; Difference 34.1
- Table 4 — Cumulative Value Of Net Errors And Omissions, Selected Countries (1970-2004) (Billions US$ and pct of GDP):
  - Switzerland: 140.640.9
  - Cambodia: 1.734.8
  - Mauritius: 1.626.9
  - Nepal: 1.625.6
  - Bahrain: 2.220.1
  - United Kingdom: 109.55.2
  - Germany: 94.43.4
  - United States: 272.92.3
  - China,P.R.: Mainland: -97.3-5.9
  - Italy: -137.7-8.2
  - Venezuela, Rep. Bol.: -21.2-19.7
  - Lebanon: -4.2-21.4
  - Russia: -145.6-25.4
  - Norway: -71.6-28.6
  - Kuwait: -56.6-109.2
- Tables 5a/5b — Matrix of Net Debt and Net Equity Positions, 2004 (selected counts):
  - Industrial Countries (Table 5a): NET EQUITY <0 >0: entries <0 611; >0 33
  - Emerging Markets and Developing Countries (Table 5b): NET EQUITY <0 >0: entries <0 730; >0 318
- Table 6 — Correlation Between Current Account and Change in Net Foreign Assets: Annual Data, 1971-2004:
  - 1971-2004: Industrial countries 0.41; Emerging markets 0.66
  - 1971-81: Industrial countries 0.71; Emerging markets 0.72
  - 1982-92: Industrial countries 0.63; Emerging markets 0.73
  - 1993-2004: Industrial countries 0.32; Emerging markets 0.54
- Tables 7a/7b — Standard deviations (selected paired values, CA/GDP and DNFA/GDP):
  - United States: 1.72.2
  - United Kingdom: 1.84.5
  - Norway: 7.07.9
  - Switzerland: 4.812.0
  - Israel: 3.56.6
  - Argentina: 3.413.1
  - China: 2.13.6
- Tables 8a/8b — Cumulative current account and change in NFA (scaled by 2004 GDP), selected country entries:
  - United States: Cumulative current account -23.1; Change in NFA -38.4; Difference 15.2; Cumulative capital transfers -0.2; Cumulative errors and omissions 2.4
  - Canada: -9.2; -16.5; 7.4; 9.5; -4.3
  - United Kingdom: -13.7; -19.3; 5.7; 1.0; 5.1
  - Switzerland: 124.8; 121.4; 3.4; -2.0; 39.5
  - Japan: 37.6; 44.1; -6.5; -1.6; -0.4
  - Turkey: Cumulative current account -42.2; Change in NFA -16.8; Difference -25.4; Cumulative debt forgiveness or capital transfers 0.0; Cumulative errors and omissions 2.4
  - China,P.R.: Mainland: 7.3; 18.1; -10.9; 0.0; -5.9
  - Indonesia: -45.4; -4.5; -40.9; 0.0; -7.0

### Concluding remarks and research agenda
- Dataset contributions:
  - Greatly increased country coverage enables a truly global view of gross and net international investment positions and helps in understanding external imbalances.
  - Extension through 1999–2004 provides insights on rapid increases in gross asset trade and shifts in international balance sheet composition.
- Key substantive conclusions:
  - Emerging market economies collectively improved net foreign positions over the past decade; external risk profiles shifted toward greater equity liabilities and larger official reserve holdings.
  - Divergent regional experiences: emerging Europe accumulated net liabilities, while emerging Asia and the Middle East have run large surpluses.
  - Developing world has lagged industrial countries in scale of cross-border asset trade (especially debt), but major emerging markets are becoming important international investors and reshaping asset trade.
- Recommended research agenda:
  - (i) Understand determinants of cross-country and time-series variation in gross and net external positions (especially for developing countries).
  - (ii) Use estimates to empirically investigate the macroeconomic impact of international financial integration.
- Caveat:
  - Substantial measurement problems remain (incomplete IIP reporting, complex financial intermediation, unrecorded flows); results should be interpreted acknowledging notable margins of uncertainty.

### Appendix I — Country/Territory list (selected presentation)
- Industrial countries (as identified in source): Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, United States
- Other included countries and territories (selected): Albania, Algeria, Angola, Argentina, Armenia, Azerbaijan, Bahrain, Bangladesh, Belarus, Benin, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam, Bulgaria, Burkina Faso, Cambodia, Cameroon, Chad, Chile, China,P.R.: Mainland, Colombia, Congo, Dem. Rep. of, Congo, Republic of, Costa Rica, Côte d'Ivoire, Croatia, Cyprus, Czech Republic, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Estonia, Ethiopia, Fiji, Gabon, Georgia, Ghana, Guatemala, Guinea, Haiti, Honduras, Hong Kong S.A.R., Hungary, India, Indonesia, Iran, Islamic Republic of, Israel, Jamaica, Jordan, Kazakhstan, Kenya, Korea, Kyrgyz Republic, Lao People's Dem.Rep, Latvia, Lebanon, Libya, Lithuania, Macedonia, Madagascar, Malawi, Mali, Malta, Mexico, Moldova, Morocco, Mozambique, Myanmar, Namibia, Nepal, Niger, Nigeria, Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Qatar, Romania, Russia, Rwanda, Saudi Arabia, Senegal, Serbia and Montenegro, Singapore, Slovak Republic, Slovenia, South Africa, Sri Lanka, Sudan, Swaziland, Syria, Taiwan Province of China, Tajikistan, Tanzania, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, Vietnam, Yemen, Zambia, Zimbabwe

*Source: _wp0669 — IMF Working Paper (EWN II), Section IV, concluding remarks from Section V, and Appendix I.*

### References..............................................................................................................

### References

### Introduction and scope
- The External Wealth of Nations Mark II (EWN II) dataset covers the period 1970–2004.
- EWN II expands coverage to 145 countries in total, over twice as many countries as the initial contribution.
- The initial contribution (Lane and Milesi-Ferretti, 2001a) included estimates for the external portfolios of 67 countries over the period 1970–98.
- The dataset incorporates an extensively revised methodology and draws upon a richer range of data sources.

### Key stylized facts and findings
- Financial globalization intensified during the past decade for both industrial and developing countries despite several financial crises and the reversal in global stock market values in 2001–02.
- There have been sizable shifts in the composition of asset and liability positions, with attendant revisions in the risk profiles of individual economies.
- Major debtors (most notably, the United States) increased reliance on debt liabilities as a source of external finance.
- Emerging markets increased the equity component in their external liabilities and accumulated significant official reserve assets.
- Among industrial countries, there has been considerable persistence in the cross-sectional distribution of net foreign asset positions: with the exception of the increase in the net external liabilities of the United States, the identities of the major creditors and debtors in 2004 are the same as in 1996.
- Regions experiencing significant increases in the scale of net external liabilities include emerging Europe, the Commonwealth of Independent States (CIS) region, and the Western Hemisphere.
- Regions experiencing significant improvements in their net external positions include Africa, emerging Asia, and the Middle East.
- A significant number of industrial countries are characterized as “short debt, long equity” (most notably, the United States and the United Kingdom); Japan is an important exception as “long debt, short equity.”
- Emerging markets and developing countries are typically “short equity,” with those countries having overall negative net liability positions showing net liabilities in both debt and equity categories.
- The valuation channel is important: innovations to the net foreign asset (NFA) position are significantly more volatile than the current account.
- Differences between changes in net foreign assets and the current account balance are quite persistent in many countries and represent an important source of long-term shifts in net external positions.

### Dataset purpose and analysis approach
- The virtually global coverage of EWN II allows meaningful definition of “world” trends and investigation of the scale of the global discrepancy in the measurement of foreign asset and liability positions.
- The paper describes the construction of the dataset and provides illustrative stylized facts based on the assembled data.
- Subsequent sections (not reproduced here) explain the methodology employed to generate estimates of foreign asset and liability positions and describe the scale and scope of the dataset.

*Source: _wp0669 - References, pages excerpted from the EWN II paper (covers 1970–2004).*

### Section IV, with some concluding remarks provided in Section V. A web appendix provides

### _wp0669 - Section IV, with some concluding remarks provided in Section V. A web appendix provides

### Methodology (construction of the EWN II dataset)
- Dataset construction blends direct national IIP estimates with cumulative-flow reconstruction and valuation adjustments using equation (1): 1
  tt
  ttt
  tt
  pp
  DDd
  pp
  −
  −
  =+
  (updating holdings by prior stock, valuation changes, and net purchases).
- Residence principle and BPM5 classification applied to categorize international positions into: Portfolio investment (equity and debt securities), Foreign direct investment (equity participations above 10 percent), Other investment (loans, deposits, trade credits), Financial derivatives, and Reserve assets.
- Primary data sources and approaches by asset category:
  - Portfolio equity: IIP (IFS/BOPS), CPIS, Frank Warnock–based bilateral U.S. Treasury estimates; market-value construction via cumulated flows with stock-market price indices (MSCI world index weighting assumption; for large domestic markets, world index excluding home country).
  - FDI: IIP estimates and UNCTAD World Investment Report; market-value series adjusted by stock indices; book-value series adjusted via cumulative U.S. dollar flows or real exchange rate adjustments.
  - Debt: IIP, World Bank Global Development Finance, IMF WEO, QEDS, CPIS (portfolio debt), BIS banking claims, IFS banking data, and national sources; valuation adjustments rely on currency composition of debt.
  - Financial derivatives: included when countries report outstanding market values.
  - Official reserves: IMF data on total reserves minus gold, supplemented by national sources.
- Use of Sinn (1994) estimates and OECD (1972) to obtain initial 1970 (or later) values where necessary.
- Treatment of measurement error:
  - Notable incomplete reporting of IIP and BOP data; cumulative net errors and omissions reported separately (not used systematically to force net positions).
  - Unrecorded flows, offshore intermediation, and complex financial structures noted as important sources of error and potential mismeasurement.

### The dataset: scope and global coverage
- Coverage and sample inclusion rules:
  - Dataset covers 145 countries over 1970–2004, and reports data for the euro area as a whole.
  - Includes all countries with income above US$1 billion in 2000 (or US$2 billion in 2004).
  - Exceptions: the Bahamas, Barbados, the Netherlands Antilles, Iraq, and Afghanistan.
  - Complete span 1970–2004 available for 91 countries; a further 54 countries have shorter periods reported.
- Data classification note:
  - Portfolio debt and other investment grouped as external debt assets and external debt liabilities in the dataset.
  - Decomposition between bonds and other investment available only for countries that report IIP (reporting period often shorter than the dataset span).

### Selected empirical findings — Scale of international financial integration
- Volume-based measure IFIGDP = (FA + FL)/GDP documents large expansion:
  - IFIGDP increased from 45 percent in 1970 to over 300 percent in 2004.
  - IFIGDP reached 100 percent in 1987; passed 200 percent in 1998; passed 300 percent in 2004.
  - Increase by a factor of 7 over 1970–2004.
- Phases and group differences:
  - Gradual increase in 1970s–1980s; acceleration in mid-1990s.
  - Emerging markets/developing countries tracked industrial countries until early 1990s; since then industrial countries accelerated faster.
- Equity-based integration (GEQGDP = (PEQA + FDIA + PEQL + FDIL)/GDP):
  - For industrial group: three phases—stable until 1985; gradual rise 1985–1995; rapid increase since 1996 except for 2001–02 equity valuation reversal.
  - Emerging markets/developing countries: strong growth in cross-border equity positions during the 1990s; equity integration grew relative to both GDP and trade.

### Selected empirical findings — Trends in external capital structure
- Share of equity liabilities in total liabilities (EQSHARE_LIAB):
  - Industrial countries: decline in 1970s; increase in 1980s and 1990s; 2004 value fell to 36 percent.
  - Emerging markets/developing countries: continued increase; in 2004 equity liabilities accounted for half of total external liabilities.
  - FDI accounts for about 75 percent of developing countries’ equity liabilities.
- Debt and reserves dynamics for emerging markets/developing countries:
  - Aggregate external debt-to-exports ratio declined dramatically since the late 1980s.
  - Ratio of official reserves to total debt liabilities increased from 29 percent in 1998 to 64 percent in 2004.
  - Reserve holdings: in 1995 total holdings by both groups were over $700 billion; by 2004 emerging markets/developing countries’ total reserves (just under $2.5 trillion) exceed holdings in industrial countries by $900 billion.

### Selected empirical findings — Net foreign asset (NFA) positions and valuation effects
- Cross-sectional relationships:
  - Ratio of net foreign assets to GDP versus log GDP per capita: cross-sectional correlation is 0.45.
  - Variation explained by GDP per capita: over 40 percent for industrial countries; less than 30 percent for emerging markets and developing countries.
- Aggregate time-series (1980 onward) highlights:
  - United States: well-known deterioration in net external position.
  - Emerging markets/developing countries: dramatic aggregate improvement since late 1990s.
  - Other industrial countries: upward trend reversed since 2001, with deterioration in Spain, Italy, Australia, and the United Kingdom.
- Composition and cross-country portfolio profiles:
  - Industrial countries: no systemic cross-sectional relation between net debt and net equity (correlation 0.02); many industrial countries (including the United States and the United Kingdom) are long foreign equity and short foreign debt; Japan shows the opposite pattern.
  - Emerging markets/developing countries: positive relation between net debt and net equity (correlation 0.35); 71 developing countries have net liabilities in both debt and equity categories; 31 of 39 countries with positive net debt have negative net equity liabilities.
- Valuation channel and its changing importance:
  - Correlation between capital gains/losses (valuation) and current account contribution to changes in NFA declined over time:
    - Industrial group: from 0.71 in 1971–1981 to 0.33 in 1993–2004.
    - Selected emerging markets: from 0.72 to 0.47 over comparable periods.
  - Valuation effects increased in importance as gross external positions expanded, often generating larger short-term volatility in changes in NFA relative to the current account.
- Cumulative discrepancies and measurement issues:
  - World-level discrepancy: measured world external liabilities exceed assets; portfolio equity accounts for almost half of the world NFA discrepancy, with debt accounting for the remainder.
  - Large bilateral/CPIS-based mismatches: portfolio equity liabilities reported by Ireland, Luxembourg, and the United States substantially exceed holdings reported in these economies by CPIS-reporting countries — suggesting under-reporting of claims on these countries.
  - Net errors and omissions cumulative values (end-2004): substantial and concentrated (Switzerland largest receiver of unrecorded capital inflows; Russia, Norway, and Kuwait notable for unrecorded capital outflows of order 20 percent of GDP or more).
  - Tables and figures (referenced in the source) document country-level divergences between the change in NFA and cumulative current account balances; capital gains, capital transfers, and net errors and omissions explain parts of these divergences in specific cases (e.g., cumulative capital gains for the United States and Switzerland; capital transfers for Canada; large unrecorded outflows in the Philippines and Venezuela).

### Concluding remarks (implications and research agenda)
- Dataset advances:
  - Greatly increased country coverage enables a truly global view of gross and net international investment positions and helps in understanding external imbalances.
  - Extension through 1999–2004 provides insights on rapid increases in the scale of gross asset trade and shifts in international balance sheet composition.
- Key substantive conclusions:
  - Emerging market economies collectively improved net foreign positions over the past decade; external risk profiles shifted toward greater equity liabilities and larger official reserve holdings.
  - Divergent regional experiences: emerging Europe accumulated net liabilities, while emerging Asia and the Middle East have run large surpluses.
  - Developing world has lagged industrial countries in scale of cross-border asset trade (especially debt), but major emerging markets are becoming important international investors and reshaping asset trade.
- Applications and future work:
  - Dataset facilitates broad-scale study of rates of return on foreign assets and liabilities and the role of valuation channels in international adjustment.
  - Two-pronged research agenda recommended: (i) understand determinants of cross-country and time-series variation in gross and net external positions (especially for developing countries); (ii) use estimates to empirically investigate the macroeconomic impact of international financial integration.
- Caveat reiterated: substantial measurement problems remain (incomplete IIP reporting, complex financial intermediation, unrecorded flows), so results should be interpreted acknowledging notable margins of uncertainty.

*Source: IMF Working Paper _wp0669, Section IV and concluding remarks from Section V (with web appendix).*

### APPENDIX I

### _wp0669 - APPENDIX I

### Country/Territory List
- Complete list of countries and territories included in the analysis (industrial countries in italics as noted in source):
  - Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, United States
  - Albania, Algeria, Angola, Argentina, Armenia, Azerbaijan, Bahrain, Bangladesh, Belarus, Benin, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam, Bulgaria, Burkina Faso, Cambodia, Cameroon, Chad, Chile, China,P.R.: Mainland, Colombia, Congo, Dem. Rep. of, Congo, Republic of, Costa Rica, Côte d'Ivoire, Croatia, Cyprus, Czech Republic, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Estonia, Ethiopia, Fiji, Gabon, Georgia, Ghana, Guatemala, Guinea, Haiti, Honduras, Hong Kong S.A.R., Hungary, India, Indonesia, Iran, Islamic Republic of, Ireland (listed earlier), Israel, Jamaica, Jordan, Kazakhstan, Kenya, Korea, Kyrgyz Republic, Lao People's Dem.Rep, Latvia, Lebanon, Libya, Lithuania, Luxembourg (listed earlier), Macedonia, Madagascar, Malawi, Mali, Malta, Marshall? (not listed), Mexico, Moldova, Morocco, Mozambique, Myanmar, Namibia, Nepal, Netherlands (listed earlier), New Zealand (listed earlier), Niger, Nigeria, Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Portugal (listed earlier), Qatar, Romania, Russia, Rwanda, Saudi Arabia, Senegal, Serbia and Montenegro, Sierra Leone? (not listed), Singapore, Slovak Republic, Slovenia, South Africa, Sri Lanka, Sudan, Swaziland, Syria, Taiwan Province of China, Tajikistan, Tanzania, Thailand, Togo, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, Vietnam, Yemen, Zambia, Zimbabwe
- Note: Industrial countries are identified in italics in the source list.

### Table 1 — Portfolio Equity Liabilities Reported By Destination And Investor Countries, 2003 (Aggregate data, billions US$)
- Reported by destination country:
  - Ireland: 479151
  - Luxembourg: 1,143623
  - United States: 1,8271,274
- Note: reported portfolio equity liabilities are those that countries report in their International Investment Position. Derived liabilities are the sum of portfolio equity assets that participants to the CPIS report to be holding in the given country.

### Table 2 — Portfolio Equity Liabilities Reported By Destination And Investor Countries, 2003 (Bilateral data, billions US$)
- Holdings in the United States (reported by investor countries):
  - Canada: 203152
  - Caribbean financial centers: 22724
  - Singapore: 737
  - Switzerland: 11952
  - United Kingdom: 229174
- Holdings in Ireland (reported by investor countries):
  - Japan: 153
  - United Kingdom: 13925
  - United States: 9522
- Source: IMF, Coordinated Portfolio Investment Survey (CPIS); Ireland: Lane and Ruane (2006); and United States, Department of the Treasury: Foreign Portfolio Holdings of U.S. Securities.

### Table 3 — Evolution of Net Foreign Asset Positions: Industrial and Developing Regions, 1996-2004
- Columns: Correlation (1996, 2004); NFA/Y Regional mean (1996); Regional mean (2004); Difference (change 1996–2004)
- Key regional entries:
  - Industrial: Correlation 0.82; NFA/Y (1996) -0.9; (2004) -6.1; Difference -5.3
  - Africa: Correlation 0.80; NFA/Y (1996) -60.4; (2004) -43.8; Difference 16.6 (note period 1996-2003)
  - Asia: Correlation 0.91; NFA/Y (1996) -10.7; (2004) 17.9; Difference 28.6
  - Emerging Europe: Correlation 0.52; NFA/Y (1996) -24.2; (2004) -49.5; Difference -25.3 (period 1997-2004)
  - CIS: Correlation 0.65; NFA/Y (1996) -7.8; (2004) -4.0; Difference 3.8 (period 1997-2004)
  - Middle East: Correlation 0.77; NFA/Y (1996) 21.3; (2004) 55.4; Difference 34.1
  - Western Hemisphere: Correlation 0.64; NFA/Y (1996) -30.7; (2004) -43.2; Difference -12.5
- Note: Correlation NFA/Y(1996,2004) is intraregional correlation between NFA/GDP ratios in 1996 and 2004. Means are regional averages weighted by GDP.

### Table 4 — Cumulative Value Of Net Errors And Omissions, Selected Countries (1970-2004)
- Cumulative net errors and omissions (Billions US$ and pct of GDP):
  - Switzerland: 140.640.9
  - Cambodia: 1.734.8
  - Mauritius: 1.626.9
  - Nepal: 1.625.6
  - Bahrain: 2.220.1
  - United Kingdom: 109.55.2
  - Germany: 94.43.4
  - United States: 272.92.3
  - China,P.R.: Mainland: -97.3-5.9
  - Italy: -137.7-8.2
  - Venezuela, Rep. Bol.: -21.2-19.7
  - Lebanon: -4.2-21.4
  - Russia: -145.6-25.4
  - Zambia: -1.5-27.6
  - Norway: -71.6-28.6
  - Bolivia: -3.2-33.7
  - Ethiopia: -2.8-34.8
  - Oman: -9.7-39.4
  - Mozambique: -2.6-42.7
  - Kuwait: -56.6-109.2
- Note: Positive net errors and omissions can indicate unrecorded net capital inflows or unrecorded net exports; negative values indicate unrecorded capital outflows or net imports. For Russia, data augmented to include “nonrepatriation of export proceeds” which are classified as other investment outflows.

### Tables 5a and 5b — Matrix of Net Debt and Net Equity Positions, 2004
- Industrial Countries (Table 5a):
  - NET EQUITY <0 >0: entries shown in source: <0 611; >0 33
- Emerging Markets and Developing Countries (Table 5b):
  - NET EQUITY <0 >0: entries shown in source: <0 730; >0 318
- Note: Net Debt = debt assets + official reserves − debt liabilities. Net Equity = portfolio equity + FDI assets − portfolio equity + FDI liabilities.

### Table 6 — Correlation Between Current Account and Change in Net Foreign Assets: Annual Data, 1971-2004
- Correlation of CA/GDP and D(NFA)/GDP:
  - 1971-2004: Industrial countries 0.41; Emerging markets 0.66
  - 1971-81: Industrial countries 0.71; Emerging markets 0.72
  - 1982-92: Industrial countries 0.63; Emerging markets 0.73
  - 1993-2004: Industrial countries 0.32; Emerging markets 0.54
- Note: Emerging markets sample includes Israel, Turkey, South Africa, Argentina, Brazil, Chile, Colombia, Mexico, Venezuela, India, Indonesia, Korea, Malaysia, Pakistan, Philippines, Thailand, China.

### Tables 7a and 7b — Standard Deviation of Current Account and Change in NFA Position
- Table 7a (Industrial Group, 1972-2004): CA/GDP and DNFA/GDP standard deviations for selected countries (examples preserving exact values):
  - United States: 1.72.2
  - United Kingdom: 1.84.5
  - Norway: 7.07.9
  - Switzerland: 4.812.0
  - Finland: 4.222.8
  - Ireland: 4.314.3
  - New Zealand: 3.311.8
  - (Other countries listed with paired numbers in source.)
- Table 7b (Selected Emerging and Developing Countries, 1982-2004):
  - Israel: 3.56.6
  - Turkey: 2.04.4
  - Argentina: 3.413.1
  - Venezuela: 7.18.5
  - India: 1.01.7
  - Malaysia: 8.811.4
  - Thailand: 6.37.9
  - China: 2.13.6
- Note: CA and DNFA are expressed as ratios to GDP.

### Tables 8a and 8b — Cumulative Current Account and Change in Net Foreign Asset Position
- Table 8a (Industrial Group, 1972-2004) — variables scaled by 2004 GDP; selected country entries:
  - United States: Cumulative current account -23.1; Change in NFA -38.4; Difference 15.2; Cumulative capital transfers -0.2; Cumulative errors and omissions 2.4
  - Canada: Cumulative current account -9.2; Change in NFA -16.5; Difference 7.4; Cumulative capital transfers 9.5; Cumulative errors and omissions -4.3
  - United Kingdom: -13.7; -19.3; 5.7; 1.0; 5.1
  - Switzerland: 124.8; 121.4; 3.4; -2.0; 39.5
  - Japan: 37.6; 44.1; -6.5; -1.6; -0.4
  - Ireland: -19.3; -4.8; -14.5; 5.7; -2.2
  - New Zealand: -91.3; -66.4; -24.8; 6.0; -1.5
  - Netherlands: -8.0; 57.2; -65.2; -3.2; -11.9
- Table 8b (Selected Developing Countries, 1982-2004) — variables scaled by 2004 GDP; selected country entries:
  - Turkey: Cumulative current account -42.2; Change in NFA -16.8; Difference -25.4; Cumulative debt forgiveness or capital transfers 0.0; Cumulative errors and omissions 2.4
  - Argentina: -27.3; -54.3; 27.1; 10.6; -10.0
  - Brazil: -35.0; -32.6; -2.4; 2.0; -2.2
  - Chile: -20.9; -31.7; 10.8; 5.5; -4.4
  - Mexico: -32.3; -30.3; -2.0; 2.4; -3.7
  - China,P.R.: Mainland: 7.3; 18.1; -10.9; 0.0; -5.9
  - India: -8.0; -10.1; 2.0; 0.0; 0.2
  - Indonesia: -45.4; -4.5; -40.9; 0.0; -7.0
- Note: Column (3) is the difference between columns (1) and (2). Cumulative periods: 1972-2004 for industrials, 1982-2004 for developing (1989-2003 for debt forgiveness).

### Figures — Key Descriptions and Notes
- Figure 1. World NFA Discrepancy and Cumulative Current Account Discrepancy, 1980-2004 (Share of world GDP)
  - Plots NFA discrepancy and cumulative current account discrepancy as shares of world GDP for 1980–2004. Vertical axis ranges from -7% to 0%.
  - Note: cumulative current account discrepancy is cumulative sum of world current account “residual”; NFA discrepancy is difference between total assets and liabilities of 145 countries. Both scaled by world GDP.
- Figure 2. Composition of The World NFA Discrepancy, 1980-2004 (Share of world GDP)
  - Series for Portfolio equity, FDI, Debt plotted as differences between world assets and liabilities in each category, scaled by world GDP; vertical axis from -6% to 2%.
- Figure 3. International Financial Integration: Industrial Group and Emerging Markets/Developing Countries Group, 1970-2004
  - Ratio of sum of foreign assets and liabilities to GDP, 1970-2004; plotted for industrial countries and emerging and developing economies.
- Figure 4. Financial Integration versus Trade Integration: Industrial Group and Emerging Markets/Developing Countries Group, 1970-2004
  - Sum of external assets and liabilities as percent of sum of exports and imports, 1970-2004; separate series for industrial countries and developing/emerging markets.
- Figure 5. International Equity Integration: Industrial Country Group and Emerging Markets and Developing Country Group, 1970-2004
  - Ratio of sum of foreign portfolio equity and FDI assets and liabilities to GDP, 1970-2004.
- Figure 6. Equity Share in External Liabilities: Industrial Country Group and Emerging Markets and Developing Country Group, 1970-2004
  - Ratio of portfolio equity and FDI liabilities to total liabilities, 1970-2004; vertical axis from 10 to 55.
- Figure 7. External Debt and Official Reserves, Emerging Markets and Developing Group, 1970-2004
  - Gross external debt (pct of exports) and Official reserves (pct of exports) for the group 1970-2004; vertical axis from 20 to 230.
  - Note: gross external debt = sum of external debt liabilities for group as percent of sum of total exports; official reserves = sum of official reserves as percent of sum of total exports.
- Figure 8. Net Foreign Assets and GDP per Capita: All Countries, 2004
  - Scatter of NFA (pct of GDP) versus Log GDP per capita (current US dollars); correlation is 0.43. Excludes Brunei Darussalam (estimated net foreign assets of 600 percent of GDP).
- Figure 9. Net Foreign Assets by Country Group (percent of Group GDP), 1980-2004
  - Aggregate net foreign assets for United States, Other industrial countries, and Emerging and developing countries divided by each group/country’s GDP.
- Figures 10a–10g. Change in NFA/GDP by region and country, various periods (1996–2004, 1997–2004, 1996–2003 as specified)
  - 10a: Industrial Countries (1996-2004) — displays NFA (pct of GDP) 1996 vs 2004 for multiple industrial economies. Note: Switzerland not displayed (NFA 111% of GDP in 1996 and 131% of GDP in 2004).
  - 10b: Africa (1996-2003)
  - 10c: Asia (1996-2004)
  - 10d: Emerging Europe (1997-2004)
  - 10e: CIS Countries (1997-2004)
  - 10f: Middle East (1996-2004)
  - 10g: Western Hemisphere (1996-2004) — note excludes Nicaragua (NFA -171% of GDP in 1996 and -104% in 2004).
- Figures 11a–11b. Net Equity versus Net Debt Positions, 2004
  - Figure 11a: Industrial Group — Net equity (pct of GDP) plotted against Net debt (pct of GDP) for industrial countries; Ireland and Luxembourg excluded due to extreme values.
  - Figure 11b: Emerging Markets and Developing Countries — analogous scatter for emerging and developing economies.

*Source: _wp0669 - APPENDIX I (PDF chapter/section) — data tables and figure notes as provided in the source content.*

### References

### References

### Data sources and statistical databases
- Bank of International Settlements, Locational Banking Statistics, available at http://www.bis.org/statistics/bankstats.htm.
- International Monetary Fund, various years, Balance of Payments Statistics, (Washington, D.C.).
- International Monetary Fund, various years, International Financial Statistics, (Washington, D.C.).
- International Monetary Fund, 1993, Balance of Payments Manual, 5th edition, (Washington, D.C.).
- International Monetary Fund, 2003a, Foreign Direct Investment Statistics: How Countries Measure FDI, (Washington, D.C.).
- International Monetary Fund, 2003b, “Three Current Policy Issues in Developing Countries,” World Economic Outlook, Chapter II, September (Washington, D.C.).
- International Monetary Fund, 2005, “Globalization and External Imbalances,” World Economic Outlook, Chapter III, April (Washington, D.C.).
- International Monetary Fund, “Coordinated Portfolio Investment Survey Database,” available at http://www.imf.org/external/np/sta/pi/datarsl.htm
- OECD, 1972, Stocks of Private Direct Investments by DAC Countries in Developing Countries at End 1967, Paris: OECD.
- OECD, various years, External Debt Statistics, Paris: OECD.
- World Bank, various years, Global Development Finance, (Washington, D.C.).

### Capital flight, capital flows, and external adjustment literature
- Claessens, Stijn, 1997, “Estimates of Capital Flight and Its Behavior,” Rev. de Analisis Economico 12, June, 3-33.
- Cuddington, John, 1986, “Capital Flight: Estimates, Issues and Explanations,” Princeton Essay in International Finance 58, December.
- Dooley, Michael, 1988, “Capital Flight: A Response to Differences in Financial Risks,” IMF Staff Papers 35, September, 422-36.
- Chinn, Menzie, John Rogers, and Frank Warnock, 2006, "Exchange Rates and External Asset Positions," mimeo, Board of Governors of the Federal Reserve System.
- Marquez, Jaime and Lisa Workman, 2001, “Modeling the IMF's Statistical Discrepancy in the Global Current Account,” IMF Staff Papers 48 no. 3.
- Rogoff, Kenneth, 1999, “Institutions for Reducing Global Financial Instability,” Journal of Economic Perspectives 13, 21-42.
- Sinn, Stefan, 1990, “Net External Asset Positions of 145 Countries,“ Kieler Studien no. 224, Institut für Weltwirtschaft an der Universität Kiel, Tübingen: J. C. B. Mohr.

### External wealth, financial integration, and portfolio studies
- Lane, Philip R., and Gian Maria Milesi-Ferretti, 2001a, “The External Wealth of Nations: Measures of Foreign Assets and Liabilities for Industrial and Developing Countries,” Journal of International Economics, Vol. 55, pp. 263–94.
- Lane, Philip R., and Gian Maria Milesi-Ferretti, 2001b, “External Capital Structure: Theory and Evidence,” in H. Siebert (ed.) The World's New Financial Landscape: Challenges for Economic Policy, (Berlin-Heidelberg: Springer-Verlag), 247-284.
- Lane, Philip R., and Gian Maria Milesi-Ferretti, 2003, “International Financial Integration,” IMF Staff Papers, Vol. 50 Special Issue, pp. 82–113 (Washington, D.C.: International Monetary Fund).
- Lane, Philip R., and Gian Maria Milesi-Ferretti, 2005a, “Financial Globalization and Exchange Rates,” IMF Working Paper 05/03, January.
- Lane, Philip R., and Gian Maria Milesi-Ferretti, 2005b, “A Global Perspective on External Positions,” IMF Working Paper 05/161, July (forthcoming in R. Clarida (ed.), G7 Current Account Imbalances: Sustainability and Adjustment, Chicago, University of Chicago Press for NBER).
- Lane, Philip R. and Frances Ruane (2006), “Globalisation and the Irish Economy,” mimeo, IIIS – Trinity College Dublin.
- Thomas, Charles P., Francis E. Warnock, and Jon Wongswan, 2004. "The Performance of International Portfolios," International Finance Discussion Paper 817, Board of Governors of the Federal Reserve System.
- Tille, Cédric, 2003, “The Impact of Exchange Rate Movements on U.S. Foreign Debt,” Current Issues in Economics and Finance 9(1), Federal Reserve Bank of New York.
- Tille, Cédric, 2005, “Financial Integration and the Wealth Effect of Exchange Rate Fluctuations,” Federal Reserve Bank of New York Staff Report no. 226, October.
- Warnock, Frank and Veronica E. Warnock, 2005, "International Capital Flows and U.S. Interest Rates," International Finance Discussion Paper 840, Board of Governors of the Federal Reserve System.
- Chinn, Menzie, John Rogers, and Frank Warnock, 2006, "Exchange Rates and External Asset Positions," mimeo, Board of Governors of the Federal Reserve System. (appears also under capital flight and exchange rate literature)

### Theoretical and review contributions on external adjustment and international finance
- Dooley, Michael, 1988, “Capital Flight: A Response to Differences in Financial Risks,” IMF Staff Papers 35, September, 422-36. (appears also under capital flight)
- Gourinchas, Pierre-Olivier and Hélène Rey, “International Financial Adjustment,” NBER Working Paper 11155.
- Obstfeld, Maurice, 2004, “External Adjustment,” Review of World Economics, 140 (4), 541-568.
- Rogoff, Kenneth, 1999, “Institutions for Reducing Global Financial Instability,” Journal of Economic Perspectives 13, 21-42. (appears also under capital flows)

*Source: _wp0669 - References (IMF PDF).*

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