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Financial remoteness and the net external position

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  • Schmitz, Martin

Abstract

This paper shows that, controlling for standard determinants of net external positions, financially-remote countries exhibit more positive net external positions. This finding is found to be stronger for less advanced countries, hinting at external funding problems for more remote countries. Being located near financially very open countries, being in currency unions with creditor countries, or being highly integrated through financial and trade linkages with a ‘core’ country facilitates net external borrowing. Consequently, evidence is found for an important role of geographic and bilateral factors for a country’s net external wealth. JEL Classification: F21, F34, F41

Suggested Citation

  • Schmitz, Martin, 2011. "Financial remoteness and the net external position," Working Paper Series 1330, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20111330
    Note: 1865580
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1330.pdf
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    Cited by:

    1. Litsios, Ioannis & Pilbeam, Keith, 2017. "An empirical analysis of the nexus between investment, fiscal balances and current account balances in Greece, Portugal and Spain," Economic Modelling, Elsevier, vol. 63(C), pages 143-152.
    2. Philip R. Lane, 2013. "External imbalances and macroeconomic policy," New Zealand Economic Papers, Taylor & Francis Journals, vol. 47(1), pages 53-70, April.
    3. McQuade, Peter & Schmitz, Martin, 2017. "The great moderation in international capital flows: A global phenomenon?," Journal of International Money and Finance, Elsevier, vol. 73(PA), pages 188-212.
    4. Michael Fidora & Martin Schmitz & Céline Tcheng, 2019. "Reducing large net foreign liabilities," Review of International Economics, Wiley Blackwell, vol. 27(2), pages 549-577, May.
    5. Philip R. Lane, 2011. "External Imbalances and Macroeconomic Policy in New Zealand," The Institute for International Integration Studies Discussion Paper Series iiisdp376, IIIS.

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    More about this item

    Keywords

    Cross-Border Investment; distance; net foreign assets; proximity;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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