We examine the link between the net foreign asset position, the trade balance and the real exchange rate. In particular, we decompose the impact of a country’s net foreign asset position (‘external wealth’) on its long-run real exchange rate into two mechanisms: the relation between...

We show that the composition of government spending influences the long-run behaviour of the real exchange rate. We develop a two-sector small open economy model in which an increase in government consumption is associated with real appreciation, while an increase in government investment may...

The relationship between international payments and the real exchange rate—the “transfer problem”—is a classic question in international economics. We use new data on countries’ net external positions together with real exchange rate data to shed light on this question. We present a...

This paper addresses the dynamics of the Swedish external position, with a particular focus on its inter-relation with the external value of the krona. We argue that financial globalisation means that a broader conceptual framework is required, whereby exchange rate fluctuations operate through...

The paper highlights the increased dispersion in net external positions in recent years, particularly among industrial countries. It provides a simple accounting framework that disentangles the factors driving the accumulation of external assets and liabilities (such as trade imbalances,...

This paper highlights the increased dispersion in net external positions in recent years, particularly among industrial countries. It provides a simple accounting framework that disentangles the factors driving the accumulation of external assets and liabilities (such as trade imbalances,...

The relationship between international payments and the real exchange rate--the transfer problem--is a classic question in international economics. We use new data on countries' net external positions together with real exchange rate data to shed light on this question. We present a model...

This paper examines the link between the net foreign asset position, the trade balance and the real exchange rate. In particular, it decomposes the impact of a country's net foreign asset position (external wealth) on its long-run real exchange rate into two mechanisms: the relation between...

The founders of the Bretton Woods System 60 years ago were primarily concerned with orderly exchange rate adjustment in a world economy that was characterized by widespread restrictions on international capital mobility. In contrast, the rapid pace of financial globalization during recent years...

Our goal in this project is to gain a better empirical understanding of the international financial implications of currency movements. To this end, we construct a database of international currency exposures for a large panel of countries over 1990-2004. We show that trade-weighted exchange...