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A Global Perspectiveon External Positions

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  • Gian-Maria Milesi-Ferretti
  • Philip R. Lane

Abstract

This paper highlights the increased dispersion in net external positions in recent years, particularly among industrial countries. It provides a simple accounting framework that disentangles the factors driving the accumulation of external assets and liabilities (such as trade imbalances, investment income flows, and capital gains) for major external creditors and debtors. It also examines the factors driving the foreign asset portfolio of international investors, with a special focus on the weight of U.S. liabilities in the rest of the world''s stock of external assets. Finally, it relates the empirical evidence to the current debate about the roles of portfolio balance effects and exchange rate adjustment in shaping the external adjustment process.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/161.

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Length: 44
Date of creation: 01 Aug 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/161

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Keywords: Capital flows; External borrowing; External debt; Financial systems; Government accounting; foreign assets; foreign asset; net foreign assets; net foreign asset; foreign asset position; net foreign asset position; foreign liabilities; foreign asset positions; fdi; net foreign asset positions; foreign investors; exchange rates; equity flows; financial integration; globalization; international investors; industrial countries; financial globalization; international financial; direct investment; international balance sheet; return on foreign assets; foreign exchange; foreign currency; equity portfolio; international financial integration; foreign direct investment; international investment; foreign asset holdings; financial markets; foreign markets; international balance sheets; foreign investor; international financial instrument; international finance; portfolio investment; foreign investment; global capital; foreign central banks; foreign capital;

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References

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  1. Harald Hau & Hélène Rey, 2004. "Can Portfolio Rebalancing Explain the Dynamics of Equity Returns, Equity Flows, and Exchange Rates?," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 126-133, May.
  2. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries," CEG Working Papers, Trinity College Dublin, Department of Economics 20012, Trinity College Dublin, Department of Economics.
  3. Philip R. Lane & Gian Maria Milesi-Ferretti, 2004. "Financial globalization and exchange rates," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 19926, London School of Economics and Political Science, LSE Library.
  4. Richard Portes & Helene Rey, 2000. "The determinants of cross-border equity flows," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 20203, London School of Economics and Political Science, LSE Library.
  5. Olivier Blanchard & Francesco Giavazzi & Filipa Sa, 2005. "The U.S. Current Account and the Dollar," NBER Working Papers 11137, National Bureau of Economic Research, Inc.
  6. Bohn, Henning & Tesar, Linda L, 1996. "U.S. Equity Investment in Foreign Markets: Portfolio Rebalancing or Return Chasing?," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 77-81, May.
  7. Maurice Obstfeld, 2004. "External Adjustment," NBER Working Papers 10843, National Bureau of Economic Research, Inc.
  8. Pierre-Olivier Gourinchas & Hélène Rey, 2005. "International Financial Adjustment," International Finance, EconWPA 0505004, EconWPA.
  9. Pierpaolo Benigno, 2009. "Price Stability with Imperfect Financial Integration," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 41(s1), pages 121-149, 02.
  10. William R. Cline, 2005. "United States as a Debtor Nation, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 3993, July.
  11. Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2004. "The performance of international portfolios," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 817, Board of Governors of the Federal Reserve System (U.S.).
  12. Henderson, Dale W. & Rogoff, Kenneth, 1982. "Negative net foreign asset positions and stability in a world portfolio balance model," Journal of International Economics, Elsevier, Elsevier, vol. 13(1-2), pages 85-104, August.
  13. Sebastian Edwards, 2005. "Is the U.S. Current Account Deficit Sustainable? And If Not, How Costly is Adjustment Likely To Be?," NBER Working Papers 11541, National Bureau of Economic Research, Inc.
  14. Philip R. Lane & G Milesi-Feretti, 2004. "Financial Globalization and Exchange Rates," CEP Discussion Papers, Centre for Economic Performance, LSE dp0662, Centre for Economic Performance, LSE.
  15. Matthew Higgins & Thomas Klitgaard, 2004. "Reserve accumulation: implications for global capital flows and financial markets," Current Issues in Economics and Finance, Federal Reserve Bank of New York, Federal Reserve Bank of New York, vol. 10(Sep).
  16. Corsetti, Giancarlo & Konstantinou, Panagiotis T, 2005. "Current Account Theory and the Dynamics of US Net Foreign Liabilities," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4920, C.E.P.R. Discussion Papers.
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