Net Foreign Asset (Com) Position: Does Financial Development Matter?
De Nederlandsche Bank
Jakob De Haan
University of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
March 1, 2012
De Nederlandsche Bank Working Paper No. 340
We investigate the relationship between a country’s domestic financial development and the (composition of its) net foreign asset position using a pooled mean group estimator and data for 51 countries during the period 1970-2007. The results show that financial development reduces a country’s long-run net foreign asset position. In addition, financial development leads to higher net equity and lower net debt positions. These findings confirm the theoretical predictions of Mendoza et al. (2009). The results are robust to using different indicators of financial development and inclusion of the level of development of a country in the cointegrating relationship.
Number of Pages in PDF File: 33
Keywords: net foreign assets, financial development, financial integration, pooled mean group estimator
JEL Classification: F30, F41, G15working papers series
Date posted: March 9, 2012
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