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Net International Investment Position Surplus: A Key to Reconciling Financial Stability and Internationalization

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  • JEONG, Young Sik

    (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP))

  • Song, Yena

    (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP))

Abstract

This study examines the influence of net international investment position (IIP) on financial stability and financial internationalization. We find a strong correlation between creditor status (IIP surplus) and resilience to financial crises. Net creditor countries appear to act as buffers, with foreign assets returning to the home country during potential crises, thus preventing deterioration in external sector soundness. Furthermore, our analysis reveals that external financial assets positively affect the revealed comparative advantage (RCA) of financial service. Specifically, the positive relationship between external financial assets and financial service RCA is more pronounced during periods of net IIP surplus compared to net IIP deficit periods. Our findings suggest that a net IIP surplus is beneficial for both financial stability and international competitiveness.

Suggested Citation

  • JEONG, Young Sik & Song, Yena, 2024. "Net International Investment Position Surplus: A Key to Reconciling Financial Stability and Internationalization," World Economy Brief 24-26, Korea Institute for International Economic Policy.
    • Handle: RePEc:ris:kiepwe:2024_026
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    Keywords

    international investment position; Financial Stability; Internationalization; external financial assets; revealed comparative advantage;
    All these keywords.

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