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Do International Investment Income Flows Smooth Income?

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  • Lane, Philip R.

Abstract

We explore some empirical properties of gross international investment positions. In order to provide income-smoothing, net investment income should negatively covary with GDP. Moreover, to maximize stabilization of GNP in the face of GDP fluctuations, the yield on foreign assets should move countercyclically and the yield on foreign liabilities procyclically. In both time-series and panel settings, we reject these hypotheses,suggesting that positive gross international investment positions are not associated with income-smoothing at business-cycle frequencies.

Suggested Citation

  • Lane, Philip R., 1999. "Do International Investment Income Flows Smooth Income?," CEPR Discussion Papers 2123, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2123
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    More about this item

    Keywords

    Asset Trade; income-smoothing; international investment income flows; international investment positions;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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