Unwinding External Stock Imbalances? The Case of Italy’s Net International Investment Position

36 Pages Posted: 9 Jul 2019

Date Written: July 20, 2018

Abstract

This paper is a case study of an (almost complete) adjustment of Italy’s external stock imbalance. After reaching a peak of around 25 per cent of GDP in early 2014, Italy’s net external debtor position has steadily decreased, reaching less than 7 per cent of GDP at the end of 2017. The contribution of this work is twofold. First, it reviews the main developments in Italy’s net international investment position (NIIP) since 1999. Second, it reports a baseline projection of Italy’s NIIP over a medium-term horizon, as implied by current account balance forecasts. Since this projection ignores the role of valuation adjustments, the study also provides an analysis of their sensitivity to a set of potential movements in exchange rates and equity or bond markets.

Keywords: international investment position, stock imbalances, valuation adjustments, current account

JEL Classification: F21, F32, F34, F36

Suggested Citation

Della Corte, Valerio and Federico, Stefano and Tosti, Enrico, Unwinding External Stock Imbalances? The Case of Italy’s Net International Investment Position (July 20, 2018). Bank of Italy Occasional Paper No. 446, July 2018, Available at SSRN: https://ssrn.com/abstract=3212610 or http://dx.doi.org/10.2139/ssrn.3212610

Valerio Della Corte (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Stefano Federico

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Enrico Tosti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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