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Country Portfolio Dynamics

  • Alan Sutherland

    (University of St Andrews)

  • Michael B Devereux

    (UBC)

This paper presents a general approximation method for characterizing time-varying equilibrium portfolios in a two-country dynamic general equilibrium model. the method can be easily adapted to most dynamic general equilibrium models, it applies to environments in which markets are complete or incomplete, and it can be used for models of any dimension. Moreover, the approximation provides simple, easily interpretable closed form solutions for the dynamics of equilibrium portfolios.

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File URL: https://www.economicdynamics.org/meetpapers/2007/paper_386.pdf
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Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 386.

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Date of creation: 2007
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Handle: RePEc:red:sed007:386
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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  1. Michael B. Devereux & Makoto Saito, 2006. "A Portfolio Theory of International Capital Flows," Working Papers 112006, Hong Kong Institute for Monetary Research.
  2. Cedric Tille, 2005. "Financial integration and the wealth effect of exchange rate fluctuations," Staff Reports 226, Federal Reserve Bank of New York.
  3. Samuelson, Paul A, 1970. "The Fundamental Approximation Theorem of Portfolio Analysis in terms of Means, Variances, and Higher Moments," Review of Economic Studies, Wiley Blackwell, vol. 37(4), pages 537-42, October.
  4. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2001. "The external wealth of nations: measures of foreign assets and liabilities for industrial and developing countries," Journal of International Economics, Elsevier, vol. 55(2), pages 263-294, December.
  5. Helene Rey & Pierre Olivier Gourinchas, 2005. "International Financial Adjustment," 2005 Meeting Papers 169, Society for Economic Dynamics.
  6. Devereux, Michael B & Sutherland, Alan, 2006. "Solving for Country Portfolios in Open Economy Macro Models," CEPR Discussion Papers 5966, C.E.P.R. Discussion Papers.
  7. Schmitt-Grohé, Stephanie & Uribe, Martín, 2001. "Solving Dynamic General Equilibrium Models Using a Second-Order Approximation to the Policy Function," CEPR Discussion Papers 2963, C.E.P.R. Discussion Papers.
  8. Jinill Kim & Sunghyun Kim & Ernst Schaumburg & Christopher A. Sims, 2003. "Calculating and using second order accurate solutions of discrete time dynamic equilibrium models," Finance and Economics Discussion Series 2003-61, Board of Governors of the Federal Reserve System (U.S.).
  9. Cedric Tille, 2003. "The impact of exchange rate movements on U.S. foreign debt," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Jan).
  10. Fabio Ghironi & Jaewoo Lee & Alessandro Rebucci, 2006. "The Valuation Channel of External Adjustment," 2006 Meeting Papers 195, Society for Economic Dynamics.
  11. Philip R. Lane & Gian Maria Milesi-Ferretti, 2007. "A Global Perspective on External Positions," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 67-102 National Bureau of Economic Research, Inc.
  12. Charles Engel & Akito Matsumoto, 2006. "Portfolio Choice in a Monetary Open-Economy DSGE Model," NBER Working Papers 12214, National Bureau of Economic Research, Inc.
  13. Martin D. D. Evans (Georgetown University) and Viktoria Hnatkovska (Georgetown University), 2005. "International Capital Flows, Returns and World Financial Integration," Working Papers gueconwpa~05-05-17, Georgetown University, Department of Economics.
  14. Kenneth L. Judd & Sy-Ming Guu, 2001. "Asymptotic Methods for Asset Market Equilibrium Analysis," NBER Working Papers 8135, National Bureau of Economic Research, Inc.
  15. Giovanni Lombardo & Alan Sutherland, 2005. " Computing Second-Order-Accurate Solutions for Rational Expectation Models Using Linear Solution Methods," CDMA Conference Paper Series 0504, Centre for Dynamic Macroeconomic Analysis.
  16. repec:tcd:wpaper:tep16 is not listed on IDEAS
  17. Cedric Tille & Eric van Wincoop, 2007. "International Capital Flows," Working Papers 122007, Hong Kong Institute for Monetary Research.
  18. Devereux, Michael B & Sutherland, Alan, 2009. "Valuation Effects and the Dynamics of Net External Assets," CEPR Discussion Papers 7273, C.E.P.R. Discussion Papers.
  19. Jinill Kim & Sunghyun Kim & Ernst Schaumburg & Christopher A. Sims, 2003. "Calculating and Using Second Order Accurate Solutions of Discrete Time," Levine's Bibliography 666156000000000284, UCLA Department of Economics.
  20. Kollmann, Robert, 2006. "International Portfolio Equilibrium and the Current Account," CEPR Discussion Papers 5512, C.E.P.R. Discussion Papers.
  21. Akito Matsumoto & Charles Engel, 2009. "The International Diversification Puzzle when Goods Prices Are Sticky; It's Really About Exchange-Rate Hedging, not Equity Portfolios," IMF Working Papers 09/12, International Monetary Fund.
  22. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, June.
  23. Lane, Philip & Milesi-Ferretti, Gian Maria, . "External Wealth of Nations," Instructional Stata datasets for econometrics extwealth, Boston College Department of Economics.
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