Long-Term Capital Movements

49 Pages Posted: 3 Feb 2006

See all articles by Philip R. Lane

Philip R. Lane

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

Gian Maria Milesi-Ferretti

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

Multiple version iconThere are 3 versions of this paper

Date Written: August 2001

Abstract

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 the role that external wealth plays in determining the behaviour of the trade balance, and we provide some evidence that a portfolio balance effect exists: real interest rate differentials are inversely related to net foreign asset positions.

Keywords: Net foreign assets, public debt, demographics

JEL Classification: F21, F34

Suggested Citation

Lane, Philip R. and Milesi-Ferretti, Gian Maria, Long-Term Capital Movements (August 2001). IMF Working Paper, Vol. , pp. 1-49, 2001. Available at SSRN: https://ssrn.com/abstract=879832

Philip R. Lane (Contact Author)

Trinity College (Dublin) - Department of Economics ( email )

Trinity College
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Centre for Economic Policy Research (CEPR)

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Central Bank of Ireland ( email )

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Gian Maria Milesi-Ferretti

International Monetary Fund (IMF) ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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