Net foreign assets and current account balances

Michael Bleaney and Mo Tian

No 2019/06, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: Theory predicts a negative long-run equilibrium relationship between net foreign assets and net exports (the trade balance plus net transfers). In a large sample of countries back to 1971, the data are found to be consistent with this provided that the short-run dynamics are allowed to vary across countries. By contrast, the correlation between net foreign assets and net exports in a given year tends to be positive in most years. The correlation between net foreign assets and the current account balance shows a similar pattern: negative in time series but positive in cross-section. Shocks to relative prices and cycles in international lending prevent the world from settling on an equilibrium for any length of time.

Keywords: current account; exchange rates; net foreign assets; net exports (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-acc and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.nottingham.ac.uk/cfcm/documents/papers/cfcm-2019-06.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:19/06

Access Statistics for this paper

More papers in Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM) School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC.
Bibliographic data for series maintained by Hilary Hughes ().