Valuation effects and the dynamics of net external assets

Michael Devereux and Alan Sutherland ()

Journal of International Economics, 2010, vol. 80, issue 1, 129-143

Abstract: 'Valuation effects' can imply that the traditional current account is an inaccurate measure of the change in the net foreign asset (NFA) position. This paper uses new developments in the analysis of portfolio choice in general equilibrium to investigate valuation effects in a two-country model. Broadly speaking, the valuation effects in the model correspond to those observed in the data. But there is a key distinction between 'unanticipated' and 'anticipated' valuation effects. Unanticipated effects can be large, dominating the movement in NFA, but anticipated effects arise only at higher orders of approximation and are small for reasonable parameterizations.

Keywords: Valuation; effects; Net; foreign; asset; dynamics; Current; account; imbalances; Country; portfolios; Risk; sharing (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (80)

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Related works:
Working Paper: Valuation Effects and the Dynamics of Net External Assets (2009)
Working Paper: Valuation Effects and the Dynamics of Net External Assets (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:80:y:2010:i:1:p:129-143

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