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Do International Investment Income Flows Smooth Income?

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  • Lane, Philip R.

Abstract

We explore some empirical properties of gross international investment positions. In order to provide income-smoothing, net investment income should negatively covary with GDP. Moreover, to maximize stabilization of GNP in the face of GDP fluctuations, the yield on foreign assets should move countercyclically and the yield on foreign liabilities procyclically. In both time-series and panel settings, we reject these hypotheses,suggesting that positive gross international investment positions are not associated with income-smoothing at business-cycle frequencies.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2123.

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Date of creation: Mar 1999
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Handle: RePEc:cpr:ceprdp:2123

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Keywords: Asset Trade; income-smoothing; international investment income flows; international investment positions;

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