{
  "title": "On the Solvency of Nations: Are Global Imbalances Consistent with Intertemporal Budget Constraints?",
  "publication": "IMF Working Papers, February 1, 2010",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/on-the-solvency-of-nations-are-global-imbalances-consistent-with-intertemporal-budget-23621",
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  "summary": "Theory predicts that a nation's stochastic intertemporal budget constraint is satisfied if net exports (NX) and net foreign assets (NFA) satisfy an error-correction specification with a residual integrated of any finite order.",
  "authors": [
    "Enrique G. Mendoza",
    "Marco Terrones",
    "Ceyhun Bora Durdu"
  ],
  "publishDate": "2010-02-01",
  "series": "IMF Working Papers",
  "sections": [
    {
      "heading": "Authors and publication",
      "content": "- By Enrique G. Mendoza, Marco Terrones, Ceyhun Bora Durdu\n- February 1, 2010\n- IMF Working Papers, Working Paper No. 2010/050\n- Volume: 2010; Issue: 050; Pages: 39\n- DOI: https://doi.org/10.5089/9781451963298.001\n- Stock No: WPIEA2010050\n- ISBN: 9781451963298\n- ISSN: 1018-5941"
    },
    {
      "heading": "Research question and theoretical framework",
      "content": "- Theory predicts that a nation's stochastic intertemporal budget constraint is satisfied if net exports (NX) and net foreign assets (NFA) satisfy an error-correction specification with a residual integrated of any finite order.\n- The empirical test searches for the existence of a negative relationship between NX and NFA consistent with external solvency."
    },
    {
      "heading": "Data and sample",
      "content": "- Sample period: 1970-2004\n- Countries: 21 industrial and 29 emerging economies"
    },
    {
      "heading": "Empirical method",
      "content": "- Uses an error-correction specification to evaluate the relationship between NX and NFA.\n- Employs Pooled Mean Group error-correction estimation to assess homogeneity and statistical significance across countries."
    },
    {
      "heading": "Key findings",
      "content": "- The results show that, despite the large global imbalances of recent years, NX and NFA positions are consistent with external solvency.\n- Pooled Mean Group error-correction estimation yields evidence of a statistically significant, negative response of the NX-GDP ratio to the NFA-GDP ratio that is largely homogeneous across countries."
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subject: Emerging and frontier financial markets, Financial sector development, Foreign assets, Real interest rates, Solvency\n- Keywords: null hypothesis, real interest rate, time series, WP\n\nIMF Working Paper 2010/050 — \"On the Solvency of Nations: Are Global Imbalances Consistent with Intertemporal Budget Constraints?\"\n\n---\n\n Content in this bundle\n\n- wp1050\n  - wp1050 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1050 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/on-the-solvency-of-nations-are-global-imbalances-consistent-with-intertemporal-budget-23621"
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    "Authors: Enrique G. Mendoza, Marco Terrones, Ceyhun Bora Durdu",
    "Published: February 1, 2010",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451963298.001",
    "By Enrique G. Mendoza, Marco Terrones, Ceyhun Bora Durdu",
    "February 1, 2010",
    "IMF Working Papers, Working Paper No. 2010/050",
    "Volume: 2010; Issue: 050; Pages: 39",
    "DOI: https://doi.org/10.5089/9781451963298.001",
    "Stock No: WPIEA2010050",
    "ISBN: 9781451963298",
    "ISSN: 1018-5941",
    "Theory predicts that a nation's stochastic intertemporal budget constraint is satisfied if net exports (NX) and net foreign assets (NFA) satisfy an error-correction specification with a residual integrated of any finite order.",
    "The empirical test searches for the existence of a negative relationship between NX and NFA consistent with external solvency.",
    "Sample period: 1970-2004",
    "Countries: 21 industrial and 29 emerging economies",
    "Uses an error-correction specification to evaluate the relationship between NX and NFA.",
    "Employs Pooled Mean Group error-correction estimation to assess homogeneity and statistical significance across countries.",
    "The results show that, despite the large global imbalances of recent years, NX and NFA positions are consistent with external solvency.",
    "Pooled Mean Group error-correction estimation yields evidence of a statistically significant, negative response of the NX-GDP ratio to the NFA-GDP ratio that is largely homogeneous across countries.",
    "Subject: Emerging and frontier financial markets, Financial sector development, Foreign assets, Real interest rates, Solvency",
    "Keywords: null hypothesis, real interest rate, time series, WP",
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