Net Foreign Assets and International Adjustment in the United States, Japan and the Federal Republic of Germany

60 Pages Posted: 15 Feb 2006

See all articles by Jocelyn Horne

Jocelyn Horne

affiliation not provided to SSRN

Jeroen Kremers

affiliation not provided to SSRN

Paul R. Masson

International Monetary Fund (IMF) - Research Department; The Brookings Institution

Date Written: March 14, 1989

Abstract

This paper examines external adjustment in the U.S., Japan and Germany from the perspective of net foreign asset positions. It asks two questions: What are, in the long run, the determinants of net foreign asset equilibrium? and: What are, in the short run, the adjustment mechanisms sustaining that equilibrium? An analysis of postwar data produces two insights. First, using a cointegration approach, the existence of long-run net foreign asset equilibrium can be identified; in each of the G-3 countries, it is a function of demographic variables and public debt. Second, deviations from the long-run equilibrium give rise to disequilibrium feedback through domestic absorption and through other channels.

JEL Classification: 430, 441

Suggested Citation

Horne, Jocelyn and Kremers, Jeroen and Masson, Paul R., Net Foreign Assets and International Adjustment in the United States, Japan and the Federal Republic of Germany (March 14, 1989). Available at SSRN: https://ssrn.com/abstract=884649 or http://dx.doi.org/10.2139/ssrn.884649

Jocelyn Horne (Contact Author)

affiliation not provided to SSRN

No Address Available

Jeroen Kremers

affiliation not provided to SSRN

No Address Available

Paul R. Masson

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

The Brookings Institution ( email )

1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States
202-797-6278 (Phone)
202-797-2968 (Fax)

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