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Do international investment income flows smooth income?

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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File URL: http://hdl.handle.net/10.1007/BF02707430
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Article provided by Springer & Institut für Weltwirtschaft (Kiel Institute for the World Economy) in its journal Weltwirtschaftliches Archiv.

Volume (Year): 137 (2001)
Issue (Month): 4 (December)
Pages: 714-736

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Handle: RePEc:spr:weltar:v:137:y:2001:i:4:p:714-736
DOI: 10.1007/BF02707430
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