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Long-Term Capital Movements

In: NBER Macroeconomics Annual 2001, Volume 16

  • Philip R. Lane
  • Gian Maria Milesi-Ferretti

International financial integration allows countries to become net creditors or net debtors with respect to the rest of the world. In this paper, we show that a small set of fundamentals-shifts in relative output levels, the stock of public debt and demographic factors-can do much to explain the evolution of net foreign asset positions. In addition, we highlight the role that "external wealth" plays in determining the behaviour of the trade balance, and we provide some evidence that a portfolio balance effect exists: real interest rate differentials are inversely related to net foreign asset positions.

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This chapter was published in:
  • Ben S. Bernanke & Kenneth Rogoff, 2002. "NBER Macroeconomics Annual 2001, Volume 16," NBER Books, National Bureau of Economic Research, Inc, number bern02-1, July.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11064.
    Handle: RePEc:nbr:nberch:11064
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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