Unwinding External Stock Imbalances? The Case of Italy’s Net International Investment Position

This paper is a case study of an (almost complete) adjustment of Italy's external stock imbalance. After reaching a peak of around 25 per cent of GDP in early 2014, Italy's net external debtor position has steadily decreased, reaching less than 7 per cent of GDP at the end of 2017. The contribution of this work is twofold. First, it reviews the main developments in Italy's net international investment position (NIIP) since 1999. Second, it reports a baseline projection of Italy's NIIP over a medium-term horizon, as implied by current account balance forecasts. Since this projection ignores the role of valuation adjustments, the study also provides an analysis of their sensitivity to a set of potential movements in exchange rates and equity or bond markets