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Long-Term Capital Movements

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  • Mr. Philip R. Lane
  • Mr. Gian M Milesi-Ferretti

Abstract

International financial integration allows countries to become net creditors or net debtors with respect to the rest of the world. In this paper, we show that a small set of fundamentals-shifts in relative output levels, the stock of public debt and demographic factors-can do much to explain the evolution of net foreign asset positions. In addition, we highlight the role that "external wealth" plays in determining the behaviour of the trade balance, and we provide some evidence that a portfolio balance effect exists: real interest rate differentials are inversely related to net foreign asset positions.

Suggested Citation

  • Mr. Philip R. Lane & Mr. Gian M Milesi-Ferretti, 2001. "Long-Term Capital Movements," IMF Working Papers 2001/107, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2001/107
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    WP; asset position; developing country; current account; Net foreign assets; public debt; demographics; capital gain; confidence level; time series; asset trade; nominal rate; least squares; foreign asset position; equity assets; debt forgiveness; rates of return on asset; foreign assets; Foreign assets; Foreign currency exposure; Real interest rates; Trade balance; Global;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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