The Role of Stock-Flow Adjustment during the Global Financial Crisis

Katharina Bergant

Economic Papers from Trinity College Dublin, Economics Department

Abstract: While the recent contraction of current account imbalances that followed the Global Financial Crisis is well documented, we analyse the increasing divergence of the net international investment position in the post-crisis period. Decomposing the change in the international net investment position into capital flows and valuation effects we find that the increasing stock imbalances are driven by the former. However, valuation changes show a stabilizing pattern. Countries with the largest net foreign liabilities experienced the greatest valuation gains. Analysing this effect by different asset classes shows that this stabilising pattern was mainly driven by debt write-offs and a change in the value of portfolio equity. For the latter, the pro-cyclical movement of the domestic stock markets during the post-crisis period improved international risk sharing through foreign portfolio equity liabilities.

Keywords: Financial Globalisation, Global Financial Crisis, External Adjustment, Risk Sharing (search for similar items in EconPapers)
JEL-codes: F32 F36 G15 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2017-05
New Economics Papers: this item is included in nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep1317

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