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Net Foreign Assets in the Euro Area: A Cointegration Analysis

  • Alessandro Girardi
  • Paolo Paesani

This paper discusses the macroeconomics of NFA at the Euro Area level, making use of the cointegrated VAR methodology. The wish to contribute to the literature on EMU motivates the choice of the topic; the non-stationarity of the data explains the choice of the methodology. The main conclusion of the paper is that, as far as Net Foreign Assets are concerned, the use of synthetic Euro area aggregate data yields a series of results consistent with economic theory. Real growth and exchange rate appreciation are both consistent with NFA accumulation. Portfolio adjustment considerations appear also to be important.

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Paper provided by University of Rome La Sapienza, Department of Public Economics in its series Working Papers with number 76.

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Length: 29
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:sap:wpaper:wp76
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  1. Jorge Selaive & Vicente Tuesta, 2003. "Net Foreign Assets And Imperfect Financial Integration: An Empirical Approach," Working Papers Central Bank of Chile 252, Central Bank of Chile.
  2. Philip R. Lane & Gian-Maria Milesi-Ferretti, 2001. "Long-Term Capital Movements," IMF Working Papers 01/107, International Monetary Fund.
  3. Binder, Michael & Pesaran, M Hashem, 1999. " Stochastic Growth Models and Their Econometric Implications," Journal of Economic Growth, Springer, vol. 4(2), pages 139-83, June.
  4. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research 35, National Bank of Belgium.
  5. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "Long-Term Capital Movements," Trinity Economics Papers 200112, Trinity College Dublin, Department of Economics.
    • Philip R. Lane & Gian Maria Milesi-Ferretti, 2002. "Long-Term Capital Movements," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 73-136 National Bureau of Economic Research, Inc.
  6. Joseph E. Gagnon, 1996. "Net foreign assets and equilibrium exchange rates: panel evidence," International Finance Discussion Papers 574, Board of Governors of the Federal Reserve System (U.S.).
  7. Lewbel, Arthur, 1992. "Aggregation with Log-Linear Models," Review of Economic Studies, Wiley Blackwell, vol. 59(3), pages 635-42, July.
  8. Kraay, Aart & Ventura, Jaume, 1997. "Current accounts in debtor and creditor countries," Policy Research Working Paper Series 1825, The World Bank.
  9. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, March.
  10. Jorge Selaive & Vicente Tuesta, 2003. "Net foreign assets and imperfect pass-through: the consumption real exchange rate anomaly," International Finance Discussion Papers 764, Board of Governors of the Federal Reserve System (U.S.).
  11. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 0091, European Central Bank.
  12. Matthieu Bussiere & Georgios Chortareas & Rebecca Driver, 2003. "Current Accounts, Net Foreign Assets and the Implications of Cyclical Factors," Eastern Economic Journal, Eastern Economic Association, vol. 29(2), pages 269-286, Spring.
  13. Agresti, Anna Maria & Mojon, Benoît, 2001. "Some stylised facts on the euro area business cycle," Working Paper Series 0095, European Central Bank.
  14. Mojon, Benoît & Peersman, Gert, 2001. "A VAR description of the effects of monetary policy in the individual countries of the euro area," Working Paper Series 0092, European Central Bank.
  15. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 0042, European Central Bank.
  16. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  17. Binder, M. & Pesaran, M.H., 1996. "Stochastic Growth," Cambridge Working Papers in Economics 9615, Faculty of Economics, University of Cambridge.
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