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Long-Term Capital Movements

  • 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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Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/107.

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Length: 49
Date of creation: 01 Aug 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/107
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  2. Kaddour Hadri, 1999. "Testing For Stationarity In Heterogeneous Panel Data," Research Papers 1999_04, University of Liverpool Management School.
  3. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 1999. "The External Wealth of Nations: Measures of Foreign Assets and Liabilities for Industrial and Developing Countries," CEPR Discussion Papers 2231, C.E.P.R. Discussion Papers.
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  9. Ray C. Fair & Kathryn M. Dominguez, 1987. "Effects of the Changing U.S. Age Distribution on Macroeconomic Equations," Cowles Foundation Discussion Papers 839, Cowles Foundation for Research in Economics, Yale University.
  10. Menzie David Chinn & Eswar Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration," IMF Working Papers 00/46, International Monetary Fund.
  11. Higgins, Matthew, 1998. "Demography, National Savings, and International Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 343-69, May.
  12. Alan M. Taylor & Jeffrey G. Williamson, 1991. "Capital Flows to the New World as an Intergenerational Transfer," NBER Historical Working Papers 0032, National Bureau of Economic Research, Inc.
  13. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
  14. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
  15. Kraay, Aart & Loayza, Norman & Serven, Luis & Ventura, Jaume, 2004. "Country Portfolios," Policy Research Working Paper Series 3320, The World Bank.
  16. Halevi, Nadav, 1971. "An empirical test of the balance of payments stages hypothesis," Journal of International Economics, Elsevier, vol. 1(1), pages 103-117, February.
  17. Herbertsson, Tryggvi Thor & Zoega, Gylfi, 1999. "Trade surpluses and life-cycle saving behaviour," Economics Letters, Elsevier, vol. 65(2), pages 227-237, November.
  18. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  19. Jocelyn Horne & Paul R. Masson & Jeroen J. M. Kremers, 1993. "Net Foreign Assets and International Adjustment: The United States, Japan, and Germany," IMF Working Papers 93/33, International Monetary Fund.
  20. Frankel, Jeffrey A. & Rose, Andrew K., 1995. "Empirical research on nominal exchange rates," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 33, pages 1689-1729 Elsevier.
  21. Lane, Philip & Milesi-Ferretti, Gian Maria, . "External Wealth of Nations," Instructional Stata datasets for econometrics extwealth, Boston College Department of Economics.
  22. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, June.
  23. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
  24. Bayoumi, Tamim & Gagnon, Joseph, 1996. "Taxation and inflation: A new explanation for capital flows," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 303-330, October.
  25. Alan M. Taylor, 1994. "Domestic Saving and International Capital Flows Reconsidered," NBER Working Papers 4892, National Bureau of Economic Research, Inc.
  26. Rebelo, Sergio, 1992. "Growth in open economies," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 36(1), pages 5-46, July.
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