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Country portfolios and the Solow-model

  • Volker Reinthaler
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    This paper shows that an open economy Solow model provides a good description of international investment positions in industrialized countries. More than half of the variation of net foreign assets in the 1990's can be attributed to cross country differences in the savings rate, population and productivity growth. Furthermore, these factors seem to be an important channel through which output and wealth affect international investment positions. We interpret this funding as evidence that decreasing returns are an important source of international capital movements. The savings rate (and population growth) influence the composition of country portfolios through their downward (upward) pressure on the marginal productivity of capital.

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    Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 904.

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    Date of creation: Sep 2005
    Date of revision:
    Handle: RePEc:upf:upfgen:904
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    1. 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.
    2. Kraay, A. & Ventura, J., 1997. "Current Acounts in Debtor and Creditor Countries," Working papers 97-12, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Harold L. Cole & Maurice Obstfeld, 1989. "Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter?," NBER Working Papers 3027, National Bureau of Economic Research, Inc.
    4. repec:tpr:qjecon:v:115:y:2000:i:4:p:1137-1166 is not listed on IDEAS
    5. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
    6. Aart Kraay & Norman Loayza & Luis Servén & Jaume Ventura, 2000. "Country portfolios," Economics Working Papers 913, Department of Economics and Business, Universitat Pompeu Fabra.
    7. Athanasoulis, Stefano G. & van Wincoop, Eric, 2000. "Growth uncertainty and risksharing," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 477-505, June.
    8. repec:tpr:qjecon:v:107:y:1992:i:2:p:407-37 is not listed on IDEAS
    9. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
    10. repec:oup:qjecon:v:107:y:1992:i:2:p:407-37 is not listed on IDEAS
    11. repec:oup:restud:v:58:y:1991:i:2:p:277-97 is not listed on IDEAS
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