Net International Investment Position Surplus: A Key to Reconciling Financial Stability and Internationalization

Young Sik Jeong () and Yena Song ()
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Young Sik Jeong: KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP), Postal: [30147] Building C, Sejong National Research Complex, 370, Sicheong-daero, Sejong-si, Korea, https://www.kiep.go.kr/eng/
Yena Song: KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP), Postal: [30147] Building C, Sejong National Research Complex, 370, Sicheong-daero, Sejong-si, Korea, https://www.kiep.go.kr/eng/

No 24-26, World Economy Brief from Korea Institute for International Economic Policy

Abstract: This study examines the influence of net international investment position (IIP) on financial stability and financial internationalization. We find a strong correlation between creditor status (IIP surplus) and resilience to financial crises. Net creditor countries appear to act as buffers, with foreign assets returning to the home country during potential crises, thus preventing deterioration in external sector soundness. Furthermore, our analysis reveals that external financial assets positively affect the revealed comparative advantage (RCA) of financial service. Specifically, the positive relationship between external financial assets and financial service RCA is more pronounced during periods of net IIP surplus compared to net IIP deficit periods. Our findings suggest that a net IIP surplus is beneficial for both financial stability and international competitiveness.

Keywords: international investment position; Financial Stability; Internationalization; external financial assets; revealed comparative advantage (search for similar items in EconPapers)
Pages: 8 pages
Date: 2024-08-12
New Economics Papers: this item is included in nep-fdg and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:ris:kiepwe:2024_026

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