The UK International Investment Position

8 Pages Posted: 26 Sep 2006

See all articles by Simon Whitaker

Simon Whitaker

Bank of England - Monetary Analysis

Abstract

This article looks at how the United Kingdom can, surprisingly, generate net investment income from net debt. The article explores the possible linkages between the improvement in net investment income and the stability of the sterling effective exchange rate index in the face of persistent trade deficits. It identifies some risks to net investment income from shifts in relative yields and a rise in global interest rates. With the rapid increase in cross-border asset trade, particularly in financial centres such as the United Kingdom, fluctuations in asset prices have become more powerful influences on our net debt position than in the past. Capital gains can stabilise a net external debt position even in the face of ongoing trade deficits, potentially reducing the extent of any adjustment to the exchange rate.

Suggested Citation

Whitaker, Simon, The UK International Investment Position. Bank of England Quarterly Bulletin, Fall 2006. Available at SSRN: https://ssrn.com/abstract=932523

Simon Whitaker (Contact Author)

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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