Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities (with the exception of China’s FDI liabilities), these countries are large holders of official reserves....

We explore some empirical properties of gross international investment positions. In order to provide income-smoothing, net investment income should negatively covary with GDP. Moreover, to maximize stabilization of GNP in the face of GDP fluctuations, the yield on foreign assets should move...

This Paper develops an empirical model of bilateral exchange rate volatility. We conjecture that for developing economies, external financial liabilities have an important effect on desired bilateral exchange rate volatility, above and beyond the standard Optimal Currency Area (OCA) factors. By...

In this paper, we study the link between profitability, fiscal policy and exchange rate regimes. We are particularly interested in adding realism to the treatment of fiscal policy by looking explicitly at its individual components. We show that the different types of government spending and...

Recent years have witnessed a change in the composition of capital flows to developing countries, and FDI and equity flows have been playing an increasing role. In this paper we discuss the challenges for international macroeconomics that these developments pose and characterize stylized facts...

We provide a systematic analysis of bilateral, source and host factors driving portfolio equity investment across countries, using newly released data on international equity holdings at the end of 2001. We develop a model that links bilateral equity holdings to bilateral trade in goods and...

Current capital flows are closely monitored, but surprisingly little is known about the stocks of external assets and liabilities held by various countries, especially in the developing world. This paper constructs estimates of foreign assets and liabilities and their equity and debt...

In recent decades, foreign assets and liabilities in advanced countries have grown rapidly relative to GDP, with the increase in gross cross-holdings far exceeding the size of net positions. Moreover, the portfolio equity and FDI categories have grown in importance relative to international debt...