TY  - JOUR
AU  - Lane, Philip R
AU  - Milesi-Ferretti, Gian
TI  - Long-Term Capital Movements
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8366
PY  - 2001
Y2  - July 2001
DO  - 10.3386/w8366
UR  - http://www.nber.org/papers/w8366
L1  - http://www.nber.org/papers/w8366.pdf
N1  - Author contact info:
Philip Lane
Central Bank of Ireland
Dublin 2
Ireland
E-Mail: plane@tcd.ie
M1  - published as Philip R. Lane, Gian Maria Milesi-Ferretti. "Long-Term Capital Movements," in Ben S. Bernanke and Kenneth Rogoff, editors, "NBER Macroeconomics Annual 2001, Volume 16" MIT Press (2002)

AB  - 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 that  external wealth' plays a critical role in determining the behavior of the trade balance, both through shifts in the desired net foreign asset position and the investment returns generated on the outstanding stock of net foreign assets. Finally, we provide some evidence that a portfolio balance effect exists: real interest rate differentials are inversely related to net foreign asset positions.
ER  -