The Shifting Composition of External Liabilities

20 Pages Posted: 18 Jan 2007

See all articles by Andre Faria

Andre Faria

International Monetary Fund (IMF) - Research Department

Philip R. Lane

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

Paolo Mauro

International Monetary Fund (IMF)

Gian Maria Milesi-Ferretti

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

Date Written: December 2006

Abstract

What determines the composition of external liabilities, both across countries and over time? More specifically, which countries account for the massive increase in equity-like liabilities (foreign direct investment and portfolio equity), especially since the mid-1990s? The empirical analysis draws on the newly-released "External Wealth of Nations Mark II" dataset. In the cross-section, we find that larger, more open economies with a better institutional quality score have a greater equity share in external liabilities, which is also positively related to natural resource production. Along the time-series dimension, we find that the shift towards equity financing is stronger among those countries that have undertaken a greater degree of domestic financial reform.

JEL Classification: F21, F34, F36

Suggested Citation

Faria, Andre Lince De and Lane, Philip R. and Mauro, Paolo and Milesi-Ferretti, Gian Maria, The Shifting Composition of External Liabilities (December 2006). IIIS Discussion Paper Series No.190. Available at SSRN: https://ssrn.com/abstract=958011 or http://dx.doi.org/10.2139/ssrn.958011

Andre Lince De Faria

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

700 19th Street NW
Washington, DC 20431
United States

Philip R. Lane (Contact Author)

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

Trinity College
Dublin 2
Ireland
+353 1 608 2259 (Phone)
+353 1 677 2503 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

Paolo Mauro

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Gian Maria Milesi-Ferretti

International Monetary Fund (IMF) ( email )

700 19th Street NW
Room 9-700
Washington, DC 20431
United States
202-623-7441 (Phone)
202-589-7441 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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