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International Portfolios with Supply, Demand and Redistributive Shocks Author info | Abstract | Publisher info | Download info | Related research | Statistics Nicolas Coeurdacier
Robert Kollmann
Philippe Martin
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This paper explains three key stylized facts observed in industrialized countries: 1) portfolio holdings are biased towards local equity; 2) international portfolios are long in foreign currency assets and short in domestic currency; 3) the depreciation of a country's exchange rate is associated with a net external capital gain, i.e. with a positive wealth transfer from the rest of the world. We present a two-country, two-good model with trade in stocks and bonds, and three types of disturbances: shocks to endowments, to the relative demand for home vs. foreign goods, and to the distribution of income between labor and capital. With these shocks, optimal international portfolios are shown to be consistent with the stylized facts.
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Find related papers by JEL classification: F30 - International Economics - - International Finance - - - General F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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Philip R. Lane and Jay C. Shambaugh, 2008.
"The Long or Short of it: Determinants of Foreign Currency Exposure in External Balance Sheets Abstract: Recently, there have been numerous advances in modelling optimal international portfolio allocat ,"
The Institute for International Integration Studies Discussion Paper Series
iiisdp253, IIIS.
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