Valuation Effects and External Adjustment: A Review

Pierre-Olivier Gourinchas
Authors registered in the RePEc Author Service: Claudio Soto (), Anella E. Munro and Juan Pablo Medina

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: This paper surveys the recent empirical and theoretical literature on valuation effects. The increase in cross-border holdings of financial assets opens the door to significant adjustments in a country's external position in response to fluctuations in asset and currency prices. Access to better data on net and gross international investment positions for a broad range of countries permits careful measurement of these “valuation effects”. We distinguish between predictable and unpredictable valuation effects, and argue that they play separate roles in the adjustment process (for better or for worse). Finally, we discuss theoretical conditions under which predictable valuation effects can arise in equilibrium

Date: 2007-12
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Citations: View citations in EconPapers (1)

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Chapter: Valuation Effects and External Adjustment: A Review (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:447

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