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Net Foreign Assets (net + foreign_asset)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting75%

Selected Abstracts

The missing dark matter in the wealth of nations and its implications for global imbalances

ECONOMIC POLICY, Issue 51 2007
Ricardo Hausmann
SUMMARY Dark matter and international imbalances Current account statistics may not be good indicators of the evolution of a country's net foreign assets and of its external position's sustainability. The value of existing assets may vary independently of current account flows, so-called ,return privileges' may allow some countries to obtain abnormal returns, and mismeasurement of FDI, unreported trade of insurance or liquidity services, and debt relief may also play a role. We analyse the relevant evidence in a large set of countries and periods, and examine measures of net foreign assets obtained by capitalizing the net investment income and then estimating the current account from the changes in this stock of foreign assets. We call dark matter the difference between our measure of net foreign assets and that measured by official statistics. We find it to be important for many countries, analyse its relationship with theoretically relevant factors, and note that the resulting perspective tends to make global net asset positions appear relatively stable. , Ricardo Hausmann and Federico Sturzenegger [source]

Investor Protection and International Investment Positions: An Empirical Analysis,

INTERNATIONAL FINANCE, Issue 2 2006
Teresa L. Cyrus
Given the recent revival of interest in the institutional determinants of global capital flows, we investigate the relationship between investor protection and international investment positions, using data on 40 countries for the period 1970,98. We find that strong shareholder protection is an important predictor of gross foreign direct investment liabilities, while countries with strong creditor protection tend to have positive stocks of net foreign assets. We conclude that the global pattern of investor protection is a significant determinant of international investment positions. [source]

Conventional and unconventional approaches to exchange rate modelling and assessment

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 1 2008
Ron Alquist
Abstract We examine the relative predictive power of the sticky price monetary model, uncovered interest parity, and a transformation of net exports and net foreign assets. In addition to bringing Gourinchas and Rey's new approach and more recent data to bear, we implement the Clark,West procedure for testing the significance of out-of-sample forecasts. The interest rate parity relation holds better at long horizons and the net exports variable does well in predicting exchange rates at short horizons in sample. In out-of-sample forecasts, we find evidence that our proxy for Gourinchas and Rey's measure of external imbalances outperforms a random walk at short horizons as do some of the other models, although no single model uniformly beats the random walk forecast. Copyright © 2007 John Wiley & Sons, Ltd. [source]

Modelling & Controlling Monetary and Economic Identities with Constrained State Space Models

INTERNATIONAL STATISTICAL REVIEW, Issue 2 2007
Gurupdesh S. Pandher
Summary The paper presents a method for modelling and controlling time series with identity structures. The approach is presented in the context of monetary targeting where the monetary identity (e.g. reserve money equals net foreign assets plus domestic credit) is modelled using a constrained state space model and next-period changes in domestic credit (policy variable) are estimated to reach the target level of reserve money. The constrained modelling ensures that aggregation and identity relations among items are dynamically satisfied during estimation, leading to more accurate forecasting and targeting. Applications to Germany, UK and USA show that the constrained state space model provides significant improvements in targeting and forecasting performance over the AR(1) benchmark and the unconstrained model. Reduction in the mean square error of targeting over AR(1) is in the range of 76,95% for the three countries while the gain in targeting efficiency over unconstrained modelling is between 21% and 55%. Beyond monetary targeting, the method has wide application to the dynamic modelling and control of economic and financial time series with identity and aggregation constraints (e.g. balance of payment, national income, purchasing power parity, company balance sheet). Résumé L'article présente une méthode de modélisation et de contrôle des séries temporelles avec des structures d'identité. L'approche est présentée dans le contexte de ciblage monétaire où l'identité monétaire (c. à d. monnaie de réserve égale avoirs étrangers plus crédit intérieur) est modélisée en utilisant un modèle spatial sous contrainte et où les variations du crédit intérieur à la période suivante (variable de politique) sont estimés pour atteindre le niveau visé de monnaie de réserve. La modélisation sous contrainte assure que les relations d'agrégation et d'identité entre items sont satisfaites en dynamique dans l'estimation, ce qui conduit à des prévisions et ciblages plus précis. L'application à l'Allemagne, le Royaume-Uni et les USA montrent que le modèle contraint apporte des améliorations importantes dans la performance de ciblage et de prévision par rapport à l'étalonnage auto-régressif (1) et au modèle sans contrainte. La réduction d'erreur du moindre carré par rapport à l'AR est comprise entre 76 et 95% pour les trois pays tandis que le gain en efficacité de ciblage sur le modèle sans contrainte se situe entre 21 et 55%. Par delà le ciblage monétaire, la méthode a une large application à la modélisation dynamique et au contrôle des séries temporelles économiques et financières avec des contraintes d'identité et d'agrégation (par ex. la balance des paiements, le revenu national, la parité de pouvoir d'achat, le bilan d'une compagnie). [source]

SHORT-RUN AND LONG-RUN DETERMINANTS OF THE REAL EXCHANGE RATE IN MEXICO

THE DEVELOPING ECONOMIES, Issue 1 2008
Antonia LÓPEZ VILLAVICENCIO
C32; F31; F41; F49 This paper explores the real exchange rate behavior in Mexico from 1960 until 2005. Since the empirical analysis reveals that the real exchange rate is not mean reverting, we propose that economic fundamental variables affect its evolution in the long run. Therefore, based on equilibrium exchange rate paradigms, we propose a simple model of real exchange rate determination, which includes the relative GDP per capita, the real interest rates, and the net foreign assets over a long period of time. Our analysis also considers the dynamic adjustment in response to shocks through impulse response functions derived from the multivariate vector autoregressive (VAR) model. [source]

On Public Investment, the Real Exchange Rate and Growth: Some Empirical Evidence from the UK and the USA

THE MANCHESTER SCHOOL, Issue 3 2003
Sugata Ghosh
This study is based on a two-country endogenous growth model with optimizing agents, where public investment affects the real exchange rate and the long-run growth rate, and does so in a non-linear fashion. Non-parametric regression analysis of quarterly data from the UK and the USA suggests that there is a significant non-linear relationship between public investment and the real exchange rate, and also between public investment and the growth rate. This is also supported by our parametric generalized method of moments model that jointly determines the real exchange rate, growth rate and net foreign assets in terms of public investment. [source]

China as a Net Creditor: An Indication of Strength or Weaknesses?

CHINA AND WORLD ECONOMY, Issue 6 2007
Xin Wang
E44; F21; F31; F41 Abstract China's international investment position is characterized by large net foreign assets, a dominance of low-return foreign exchange reserves and costly foreign direct investment in foreign assets and foreign liabilities. In addition, China's foreign investment positions are facing potentially large exchange risks. These features reflect entrenched institutional and structural problems in China, including underdeveloped capital markets, biased resource allocation and a defective social security system. China's net creditor status might actually be an indication of weakness rather than strength. To improve its international investment position, China must speed up economic reforms and allow the market to play a fundamental role in resource allocation. [source]