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Citations (64)



Long-Term Capital Movements

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)

July 2001

CEPR Discussion Paper No. 2873

International financial integration allows countries to become net creditors or net debtors with respect to the rest of the world. In this Paper, we show that a small set of fundamentals shifts in relative output levels, the stock of public debt and demographic factors can do much to explain the evolution of net foreign asset positions. In addition, we highlight that 'external wealth' plays a critical role in determining the behavior of the trade balance, both through shifts in the desired net foreign asset position and the investment returns generated on the outstanding stock of net foreign assets. Finally, we provide some evidence that a portfolio balance effect exists: real interest rate differentials are inversely related to net foreign asset positions.

Number of Pages in PDF File: 55

Keywords: Net foreign assets, capital flows, trade balance, portfolio balance

JEL Classification: E20, F20, F40, O10

Date posted: July 26, 2001  

Suggested Citation

Lane, Philip R. and Milesi-Ferretti, Gian Maria, Long-Term Capital Movements (July 2001). CEPR Discussion Paper No. 2873. Available at SSRN: https://ssrn.com/abstract=276778

Contact Information

Philip R. Lane (Contact Author)
Trinity College (Dublin) - Department of Economics ( email )
Trinity College
Dublin 2
+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
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
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)
Feedback to SSRN

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