International Portfolios, Current Account Dynamics and Capital Accumulation

Robert Kollmann () and Nicolas Coeurdacier

No 817, 2008 Meeting Papers from Society for Economic Dynamics

Abstract: abstract from capital, equity home bias is not sensitive to preference parameters. In the model, NFA changes are largely driven by capital gains/losses due to movements in equity prices. The model thus matches the high volatility and low serial correlation of NFA changes. We compare settings with complete and incomplete financial markets. Imperfect hedging is required to generate a realistic conventional current account measure that solely reflects aggregate net flows of assets between countries.

Date: 2008
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Working Paper: International portfolios, current account dynamics and capital accumulation (2008)
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