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

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  • International Monetary Fund

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.

Suggested Citation

  • International Monetary Fund, 1989. "Net Foreign Assets and International Adjustment in the United States, Japan and the Federal Republic of Germany," IMF Working Papers 1989/022, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1989/022
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=27268
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    Cited by:

    1. Bankim Chadha & Steven Symansky, 1991. "Sustainability, Premia, and the Dollar," NBER Chapters, in: Financial Markets and Financial Crises, pages 231-258, National Bureau of Economic Research, Inc.

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