Dynamics of Net Foreign Asset Components in the EMU

Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 5

29 Pages Posted: 6 Oct 2017

See all articles by Tatiana Cesaroni

Tatiana Cesaroni

Bank of Italy

Roberta de Santis

Italian National Institute of Statistics

Date Written: September 4, 2017

Abstract

In the last two decades, foreign capital investments have followed different paths in EMU countries. Given their importance for growth and productivity, we analyse the factors underlying the dynamics of foreign direct investments, portfolio debt investments, and portfolio equity investments in EMU countries over the years 1996-2014. We assess how the heterogeneous behavior between core and peripheral countries can be related to macroeconomic factors (business cycle, trade, financial openness and spreads) and institutional quality. Our results show that financial integration as well as interest rates spread had an impact on the main components of foreign assets which was different between core and peripheral countries. In EMU countries as a whole we find a statistical significant relationship between institutional quality and foreign capital components, which is entirely driven by core countries.

Keywords: Net International Investment Positions, PEI, FDI and PDI, Institutional Quality, Euro Area

JEL Classification: F3, F4

Suggested Citation

Cesaroni, Tatiana and de Santis, Roberta, Dynamics of Net Foreign Asset Components in the EMU (September 4, 2017). Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 5, Available at SSRN: https://ssrn.com/abstract=3048241

Tatiana Cesaroni (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Roberta De Santis

Italian National Institute of Statistics ( email )

Via Cesare Balbo 16
00184 Rome, 0185
Italy

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