Long-Term Capital Movements

Gian Maria Milesi-Ferretti () and Philip Lane

No 2873, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: International financial integration allows countries to become net creditors or net debtors with respect to the rest of the world. In this Paper, we show that a small set of fundamentals shifts in relative output levels, the stock of public debt and demographic factors can do much to explain the evolution of net foreign asset positions. In addition, we highlight that ?external wealth? plays a critical role in determining the behavior of the trade balance, both through shifts in the desired net foreign asset position and the investment returns generated on the outstanding stock of net foreign assets. Finally, we provide some evidence that a portfolio balance effect exists: real interest rate differentials are inversely related to net foreign asset positions.

Keywords: Net foreign assets; Capital flows; Trade balance; Portfolio balance (search for similar items in EconPapers)
JEL-codes: E20 F20 F40 O10 (search for similar items in EconPapers)
Date: 2001-07
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Citations: View citations in EconPapers (145)

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Related works:
Chapter: Long-Term Capital Movements (2002)
Working Paper: Long-Term Capital Movements (2001)
Working Paper: Long-Term Capital Movements (2001)
Working Paper: Long-Term Capital Movements (2001)
Working Paper: Long-Term Capital Movements (2001)
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