External Wealth, the Trade Balance and the Real Exchange Rate

Gian Maria Milesi-Ferretti (gmilesiferretti@brookings.edu) and Philip Lane

No 3153, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine the link between the net foreign asset position, the trade balance and the real exchange rate. In particular, we decompose the impact of a country?s net foreign asset position (?external wealth?) on its long-run real exchange rate into two mechanisms: the relation between external wealth and the trade balance; and, holding fixed other determinants, a negative relation between the trade balance and the real exchange rate. We also provide additional evidence that the relative price of nontradables is an important channel linking the trade balance and the real exchange rate.

Keywords: Net foreign assets; Trade balance; Real exchange rate (search for similar items in EconPapers)
JEL-codes: F21 F31 F41 (search for similar items in EconPapers)
Date: 2002-01
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (169)

Downloads: (external link)
https://cepr.org/publications/DP3153 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: External wealth, the trade balance, and the real exchange rate (2002)
Working Paper: External Wealth, the Trade Balance, and the Real Exchange Rate (2002)
Working Paper: External Wealth, the Trade Balance, and the Real Exchange Rate (2002)
Working Paper: External Wealth, the Trade Balance, and the Real Exchange Rate (2001)
Working Paper: External Wealth, the Trade Balance, and the Real Exchange Rate (2001)
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:cpr:ceprdp:3153

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP3153
orders@cepr.org

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by (repec@cepr.org).