Abstract

http://ssrn.com/abstract=299247
 
 

References (37)



 
 

Citations (44)



 


 



External Wealth, the Trade Balance and the Real Exchange Rate


Philip R. Lane


Trinity College (Dublin) - Department of Economics; Centre for Economic Policy Research (CEPR)

Gian Maria Milesi-Ferretti


International Monetary Fund (IMF); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

January 2002

CEPR Discussion Paper No. 3153

Abstract:     
We examine the link between the net foreign asset position, the trade balance and the real exchange rate. In particular, we decompose the impact of a country's net foreign asset position ("external wealth") on its long-run real exchange rate into two mechanisms: the relation between external wealth and the trade balance; and, holding fixed other determinants, a negative relation between the trade balance and the real exchange rate. We also provide additional evidence that the relative price of nontradables is an important channel linking the trade balance and the real exchange rate.

Number of Pages in PDF File: 40

Keywords: Net foreign assets, trade balance, real exchange rate

JEL Classification: F21, F31, F41

working papers series


Date posted: February 3, 2002  

Suggested Citation

Lane, Philip R. and Milesi-Ferretti, Gian Maria, External Wealth, the Trade Balance and the Real Exchange Rate (January 2002). CEPR Discussion Paper No. 3153. Available at SSRN: http://ssrn.com/abstract=299247

Contact Information

Philip R. Lane (Contact Author)
Trinity College (Dublin) - Department of Economics ( email )
Trinity College
Dublin 2
Ireland
+353 1 608 2259 (Phone)
+353 1 677 2503 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Gian Maria Milesi-Ferretti
International Monetary Fund (IMF) ( email )
700 19th Street NW
Room 9-700
Washington, DC 20431
United States
202-623-7441 (Phone)
202-589-7441 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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