Long-Term Capital Movements
August 1, 2001
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Summary
International financial integration allows countries to become net creditors or net debtors with respect to the rest of the world. In this paper, we show that a small set of fundamentals-shifts in relative output levels, the stock of public debt and demographic factors-can do much to explain the evolution of net foreign asset positions. In addition, we highlight the role that "external wealth" plays in determining the behaviour of the trade balance, and we provide some evidence that a portfolio balance effect exists: real interest rate differentials are inversely related to net foreign asset positions.
Subject: External position, Financial services, Foreign assets, Foreign currency exposure, International trade, Money, Public debt, Real interest rates, Trade balance
Keywords: asset position, asset trade, capital gain, confidence level, current account, debt forgiveness, demographics, developing country, equity assets, foreign asset position, foreign assets, Foreign assets, Foreign currency exposure, Global, least squares, Net foreign assets, nominal rate, public debt, rates of return on asset, Real interest rates, time series, Trade balance, WP
Pages:
49
Volume:
2001
DOI:
Issue:
107
Series:
Working Paper No. 2001/107
Stock No:
WPIEA1072001
ISBN:
9781451852981
ISSN:
1018-5941
