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International Portfolios with Supply, Demand and Redistributive Shocks

In: NBER International Seminar on Macroeconomics 2007

Listed author(s):
  • Nicolas Coeurdacier
  • Robert Kollmann
  • Philippe Martin

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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This chapter was published in:
  • Richard Clarida & Francesco Giavazzi, 2009. "NBER International Seminar on Macroeconomics 2007," NBER Books, National Bureau of Economic Research, Inc, number clar07-1, October.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 3009.
    Handle: RePEc:nbr:nberch:3009
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