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Net Foreign Assets and International Adjustment

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Author Info

  • Jocelyn Horne
  • Paul R. Masson
  • Jeroen J. M. Kremers

Abstract

This paper examines external adjustment in the United States, Japan and Germany from the perspective of net foreign asset positions. It asks two questions: What are, in the long run, the determinants of net foreign asset equilibrium? and: What are, in the short run, some of the adjustment mechanisms sustaining that equilibrium? An analysis of post-war data produces two insights. First, using a cointegration approach, the existence of long-run net foreign asset equilibrium can be identified: it is a function of demographic variables and public debt. Second, deviations from long-run equilibrium give rise to feedback through different components of domestic absorption in the three countries.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 93/33.

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Length: 26
Date of creation: 01 Apr 1993
Date of revision:
Handle: RePEc:imf:imfwpa:93/33

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Related research

Keywords: Current account balances; Economic models; net foreign assets; foreign assets; foreign asset; net foreign asset; foreign asset positions; net foreign asset positions; foreign asset stocks; industrial countries; foreign asset position; exchange rates; foreign liabilities; net foreign asset position; foreign asset accumulation; foreign exchange; capital flows; foreign investments; international financial; international financial statistics;

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Cited by:
  1. Philip R. Lane & Gian Maria Milesi-Ferretti, 2002. "Long-Term Capital Movements," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 2001, Volume 16, pages 73-136 National Bureau of Economic Research, Inc.
  2. Mariam Camarero & Cecilio Tamarit, 2001. "A panel cointegration approach to the estimation of the peseta real exchange rate," Working Papers, Asociación Española de Economía y Finanzas Internacionales 01-08, Asociación Española de Economía y Finanzas Internacionales.
  3. Jansen, Pieter W., 2006. "Low inflation, a high net savings surplus and institutional restrictions keep the Japanese long-term interest rate low," Serie Research Memoranda, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0011, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  4. Lindblad, Hans & Sellin, Peter, 2003. "The Equilibrium Rate of Unemployment and the Real Exchange Rate: An Unobserved Components System Approach," Working Paper Series 152, Sveriges Riksbank (Central Bank of Sweden).
  5. S. Holle & M. Demertzis, 2002. "External Wealth and the Trade Balance: A Time-Series Analysis for the Netherlands," WO Research Memoranda (discontinued), Netherlands Central Bank, Research Department 716, Netherlands Central Bank, Research Department.
  6. Lindblad, Hans & Sellin, Peter, 2006. "A Simultaneous Model of the Swedish Krona, the US Dollar and the Euro," Working Paper Series 193, Sveriges Riksbank (Central Bank of Sweden).

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