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A Global Perspectiveon External Positions

Author Info

  • Gian-Maria Milesi-Ferretti
  • Philip R. Lane

Abstract

This paper highlights the increased dispersion in net external positions in recent years, particularly among industrial countries. It provides a simple accounting framework that disentangles the factors driving the accumulation of external assets and liabilities (such as trade imbalances, investment income flows, and capital gains) for major external creditors and debtors. It also examines the factors driving the foreign asset portfolio of international investors, with a special focus on the weight of U.S. liabilities in the rest of the world''s stock of external assets. Finally, it relates the empirical evidence to the current debate about the roles of portfolio balance effects and exchange rate adjustment in shaping the external adjustment process.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/161.

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Length: 44
Date of creation: 01 Aug 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/161
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Keywords: Capital flows; External borrowing; External debt; Financial systems; Government accounting; foreign assets; foreign asset; net foreign assets; net foreign asset; foreign asset position; net foreign asset position; foreign liabilities; foreign asset positions; fdi; net foreign asset positions; foreign investors; exchange rates; equity flows; financial integration; globalization; international investors; industrial countries; financial globalization; international financial; direct investment; international balance sheet; return on foreign assets; foreign exchange; foreign currency; equity portfolio; international financial integration; foreign direct investment; international investment; foreign asset holdings; financial markets; foreign markets; international balance sheets; foreign investor; international financial instrument; international finance; portfolio investment; foreign investment; global capital; foreign central banks; foreign capital;

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Find related papers by JEL classification:
  • F31 - International Economics - - International Finance - - - Foreign Exchange
  • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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  1. Richard Portes & Helene Rey, 1999. "The Determinants of Cross-Border Equity Flows," NBER Working Papers 7336, National Bureau of Economic Research, Inc.
  2. Hau, Harald & Rey, Hélène, 2004. "Can Portfolio Rebalancing Explain the Dynamics of Equity Returns, Equity Flows and Exchange Rates?," CEPR Discussion Papers 4517, C.E.P.R. Discussion Papers.
  3. Philip R. Lane & G Milesi-Feretti, 2004. "Financial Globalization and Exchange Rates," CEP Discussion Papers dp0662, Centre for Economic Performance, LSE.
  4. Blanchard, Olivier & Giavazzi, Francesco & Sá, Filipa, 2005. "The US Current Account and the Dollar," CEPR Discussion Papers 4888, C.E.P.R. Discussion Papers.
  5. Bohn, Henning & Tesar, Linda L, 1996. "U.S. Equity Investment in Foreign Markets: Portfolio Rebalancing or Return Chasing?," American Economic Review, American Economic Association, vol. 86(2), pages 77-81, May.
  6. Maurico Obstfeld, 2004. "External adjustment," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 140(4), pages 541-568, December.
  7. Henderson, Dale W. & Rogoff, Kenneth, 1982. "Negative net foreign asset positions and stability in a world portfolio balance model," Journal of International Economics, Elsevier, vol. 13(1-2), pages 85-104, August.
  8. Pierre-Olivier Gourinchas & Helene Rey, 2005. "International Financial Adjustment," NBER Working Papers 11155, National Bureau of Economic Research, Inc.
  9. Pierpaolo Benigno, 2009. "Price Stability with Imperfect Financial Integration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(s1), pages 121-149, 02.
  10. William R. Cline, 2005. "United States as a Debtor Nation, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3993, December.
  11. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries," Trinity Economics Papers 20014, Trinity College Dublin, Department of Economics.
  12. Sebastian Edwards, 2005. "Is the U.S. Current Account Deficit Sustainable? And If Not, How Costly is Adjustment Likely To Be?," NBER Working Papers 11541, National Bureau of Economic Research, Inc.
  13. Charles P. Thomas & Francis E. Warnock & Jon Wongswan, 2004. "The performance of international portfolios," International Finance Discussion Papers 817, Board of Governors of the Federal Reserve System (U.S.).
  14. Corsetti, Giancarlo & Konstantinou, Panagiotis T, 2005. "Current Account Theory and the Dynamics of US Net Foreign Liabilities," CEPR Discussion Papers 4920, C.E.P.R. Discussion Papers.
  15. Matthew Higgins & Thomas Klitgaard, 2004. "Reserve accumulation: implications for global capital flows and financial markets," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 10(Sep).
  16. Philip R. Lane & Gian Maria Milesi-Ferretti, 2004. "Financial globalization and exchange rates," LSE Research Online Documents on Economics 19926, London School of Economics and Political Science, LSE Library.
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