Net Foreign Assets and International Adjustment: The United States, Japan, and Germany
IMF Working Papers, April 1, 1993
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- Net Foreign Assets and International Adjustment: The United States, Japan, and Germany
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Bibliographic details
- Authors: Jocelyn Horne, Paul R Masson, Jeroen J. M. Kremers
- Published: April 1, 1993
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451979244.001
Overview
- Paper examines external adjustment in the United States, Japan and Germany from the perspective of net foreign asset positions.
- Central questions:
- What are, in the long run, the determinants of net foreign asset equilibrium?
- What are, in the short run, some of the adjustment mechanisms sustaining that equilibrium?
- Analysis based on post-war data.
Key findings
- Long-run equilibrium
- Using a cointegration approach, the existence of long-run net foreign asset equilibrium can be identified.
- Long-run net foreign asset equilibrium is a function of demographic variables and public debt.
- Short-run adjustment
- Deviations from long-run equilibrium give rise to feedback through different components of domestic absorption in the three countries.
Methodology and scope
- Empirical approach: cointegration analysis applied to post-war data.
- Country focus: United States, Japan, Germany.
- Subject areas listed: Balance of payments, Current account, Expenditure, External position, Foreign assets, Foreign currency exposure, Money, Public debt.
- Keywords include: asset accumulation, asset stock accumulation, Current account, current account flow, debt ratio, dependency ratio, equilibrium of the United States, exchange rate movement, F/Y, Foreign assets, Foreign currency exposure, Germany, GNP, GNP ratio, ratio, ratio to GNP, WP, youth dependency ratio.
Policy-relevant implications (as articulated in the paper)
- Long-run determinants indicate that demographic trends and public debt dynamics are central to sustainable net foreign asset positions.
- Short-run deviations imply that domestic absorption components (consumption, investment, government spending) act as feedback channels in adjustment, differing across the United States, Japan, and Germany.