External Balance Sheets: Concepts And Empirical Approximation

International financial relationships should be interpreted in the context of a comprehensive conceptual framework; this paper advocates the use of concepts developed to measure and analyze balance of payments flows. Broad‐based, empirical estimates of the international wealth of most countries of the western world are presented on the basis of cumulating balance of payments flows over a lengthy period. Among the more interesting aspects of the results are: the importance of intra‐industrial country capital flows in a global context; the propensity of debtors to regard a larger share of their aggregate external debt as long term than do their creditors; the overwhelming importance of banks located in the industrial countries in global external asset and liability positions, and the preponderance of short‐term positions taken by those banks; and the tendency for balance of payments records to report more direct investment assets than liabilities. The paper also contains some observations, based on the cumulations of balance of payments capital flows, concerning the nature and size of certain deficiencies in alternative sources–particularly the World Bank's Debtor Reporting System, and the Bank for International Settlements' banking data–of information on outstanding external debt positions.