Country Portfolios / Aart Kraay, Norman Loayza, Luis Serven, Jaume Ventura.

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Kraay, Aart

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w7795.Publication details: Cambridge, Mass. National Bureau of Economic Research 2000.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: How do countries hold their financial wealth? We construct a new database of countries' claims on capital located at home and abroad, and international borrowing and lending, covering 68 countries from 1966 to 1997. We find that a small amount of capital flows from rich countries to poor countries. Countries' foreign asset positions are remarkably persistent, and mostly take the form of foreign loans rather than foreign equity. To interpret these facts, we build a simple model of international capital flows that highlights the interplay between diminishing returns, production risk and sovereign risk. We show that in the presence of reasonable diminishing returns and production risk, the probability that international crises occur twice a century is enough to generate a set of country portfolios that are roughly consistent with the data.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w7795 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

July 2000.

How do countries hold their financial wealth? We construct a new database of countries' claims on capital located at home and abroad, and international borrowing and lending, covering 68 countries from 1966 to 1997. We find that a small amount of capital flows from rich countries to poor countries. Countries' foreign asset positions are remarkably persistent, and mostly take the form of foreign loans rather than foreign equity. To interpret these facts, we build a simple model of international capital flows that highlights the interplay between diminishing returns, production risk and sovereign risk. We show that in the presence of reasonable diminishing returns and production risk, the probability that international crises occur twice a century is enough to generate a set of country portfolios that are roughly consistent with the data.