Effects of Volatile Asset Priceson Balance of Payments and International Investment Position

Marco Committeri

No 2000/191, IMF Working Papers from International Monetary Fund

Abstract: This paper aims at clarifying, with the help of a simple formal model and numerical examples, several aspects of the relationship between international investment position (IIP) and balance of payments (BOP) statistics. Exact and approximated relations are compared to analyze the estimation accuracy of the most popular data model used to reconcile BOP transaction statistics with IIP and external debt stock statistics, and discuss (a) how such accuracy is affected by volatile asset prices and transactions and (b) how net errors and omissions are related to the model in question. Numerical examples based on equity prices and exchange rates actually observed in the 1990s suggest that the bias might have been especially large for estimates based on less detailed financial information. Serious consideration should be therefore given by national compilers to make use of more detailed financial information in compiling BOP and IIP statistics.

Keywords: WP; Balance of payments; International investment position; External debt; Statistical accuracy; Errors and omissions; Volatility; Capital flight; transaction volatility; period price; case price dispersion; IMF model; financial asset; Non-transaction adjustment; stock estimator; portfolio investment transaction; Stocks; Exchange rates; Securities; Balance of payments statistics; Asset prices; Global (search for similar items in EconPapers)
Pages: 42
Date: 2000-11-01
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Citations: View citations in EconPapers (2)

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