Showing papers by "Gian Maria Milesi-Ferretti published in 2008"

International Investment Patterns

Abstract: We provide a systematic analysis of the bilateral factors driving portfolio equity holdings across countries. We find that bilateral equity holdings are strongly correlated with bilateral trade in goods and services. Larger bilateral positions are also associated with proxies for informational proximity.

Exchange Rate Assessments; CGER Methodologies

Abstract: The IMF's Consultative Group on Exchange Rate Issues (CGER) was formed in the mid-1990s to provide exchange rate assessments for a number of advanced economies from a multilateral perspective. The rapid increase in international trade and financial integration since then has inspired the IMF to place stronger emphasis on multilateral surveillance, macro-financial linkages, and the implications of globalization. The CGER therefore has broadened its mandate to cover both key advanced economies and major emerging market economies, and this Occasional Paper summarizes the methodologies that underpin the expanded analysis.

The Drivers of Financial Globalization

Abstract: Over the past decade, emerging markets have accounted for a growing fraction of world GDP and international trade (reflecting fast growth in China and India, but also strong economic performance across the board). And the spec tacular increase in foreign exchange reserve holdings, the growing importance of sovereign wealth funds, and the pattern of global imbal ances more generally suggest that these coun tries are also playing a major role in financial globalization.

Real Exchange Rates and Fundamentals: A Cross-Country Perspective

Abstract: This paper employs newly constructed measures for productivity differentials, external imbalances, and commodity terms of trade to estimate a panel cointegrating relationship between real exchange rates and a set of fundamentals for a sample of 48 industrial countries and emerging markets. It finds evidence of a strong positive relation between the CPI-based real exchange rate and commodity terms of trade. The estimated impact of productivity growth differentials between traded and nontraded goods, while statistically significant, is small. Increases in net foreign assets and in government consumption tend to be associated with appreciating real exchange rates.

Real Exchange Rates and Fundamentals; A Cross-Country Perspective

Abstract: This paper employs newly constructed measures for productivity differentials, external imbalances, and commodity terms of trade to estimate a panel cointegrating relationship between real exchange rates and a set of fundamentals for a sample of 48 industrial countries and emerging markets. It finds evidence of a strong positive relation between the CPI-based real exchange rate and commodity terms of trade. The estimated impact of productivity growth differentials between traded and nontraded goods, while statistically significant, is small. Increases in net foreign assets and in government consumption tend to be associated with appreciating real exchange rates.

Real Exchange Rates and Fundamentals; A Cross-Country Perspective

Abstract: This paper employs newly constructed measures for productivity differentials, external imbalances, and commodity terms of trade to estimate a panel cointegrating relationship between real exchange rates and a set of fundamentals for a sample of 48 industrial countries and emerging markets. It finds evidence of a strong positive relation between the CPI-based real exchange rate and commodity terms of trade. The estimated impact of productivity growth differentials between traded and nontraded goods, while statistically significant, is small. Increases in net foreign assets and in government consumption tend to be associated with appreciating real exchange rates.

Where Did All the Borrowing Go? A Forensic Analysis of the U.S. External Position

Abstract: The deterioration in the U.S. net external position in recent years has been much smaller than the extensive net borrowing associated with large current account deficits would have suggested. This paper examines the sources of discrepancies between net borrowing and accumulation of net liabilities for the U.S. economy over the past 25 years. In particular, it highlights and quantifies the role played by net capital gains on the U.S. external portfolio and 'residual adjustments' in explaining this discrepancy. It discusses whether these 'residual adjustments' are likely to be originating from measurement errors in external assets and liabilities, financial flows, or capital gains, and explores the implications of these conjectures for the U.S. financial account and external position.

Where Did All the Borrowing Go? A Forensic Analysis of the U.S. External Position

Abstract: The deterioration in the U.S. net external position in recent years has been much smaller than the extensive net borrowing associated with large current account deficits would have suggested. This paper examines the sources of discrepancies between net borrowing and accumulation of net liabilities for the U.S. economy over the past 25 years. In particular, it highlights and quantifies the role played by net capital gains on the U.S. external portfolio and 'residual adjustments' in explaining this discrepancy. It discusses whether these 'residual adjustments' are likely to be originating from measurement errors in external assets and liabilities, financial flows, or capital gains, and explores the implications of these conjectures for the U.S. financial account and external position.

Fundamentals at Odds? The U.S. Current Account Deficit and The Dollar

Abstract: The real effective exchange rate of the dollar is close to its minimum level for the past 4decades (as of September 2008). At the same time, however, the U.S. trade and currentaccount deficits remain large and, absent a significant correction in coming years, wouldcontribute to a further accumulation of U.S. external liabilities. The paper discusses thetension between these two aspects of the dollar assessment, and what factors can helpreconcile them. It focuses in particular on the terms of trade, adjustment lags, andmeasurement issues related to both the real effective exchange rate and the current accountbalance.

Fundamentals at Odds? The US Current Account Deficit and Dollar

Abstract: In mid-2008, the real effective exchange rate (REER) of the dollar was close to its minimum level for the past four decades. At the same time, however, the US trade and current account deficits remain large and, absent a significant correction in coming years, would contribute to a further accumulation of US external liabilities. The paper discusses the tension between these two aspects of the dollar assessment, and what factors can help to reconcile them. It focuses in particular on the terms of trade, adjustment lags and measurement issues related to both the REER and the current account balance.

Fundamentals at Odds? The US Current Account Deficit and The Dollar

Abstract: In mid-2008, the real effective exchange rate of the dollar was close to its minimum level for the past 4 decades. At the same time, however, the U.S. trade and current account deficits remain large and, absent a significant correction in coming years, would contribute to a further accumulation of U.S. external liabilities. The paper discusses the tension between these two aspects of the dollar assessment, and what factors can help reconcile them. It focuses in particular on the terms of trade, adjustment lags, and measurement issues related to both the real effective exchange rate and the current account balance.

Fundamentals at Odds? The U.S. Current Account Deficit and The Dollar*

Abstract: The real effective exchange rate of the dollar is close to its minimum level for the past 4 decades (as of September 2008). At the same time, however, the U.S. trade and current account deficits remain large and, absent a significant correction in coming years, would contribute to a further accumulation of U.S. external liabilities. The paper discusses the tension between these two aspects of the dollar assessment, and what factors can help reconcile them. It focuses in particular on the terms of trade, adjustment lags, and measurement issues related to both the real effective exchange rate and the current account balance.

Exchange Rate Assessments; CGER Methodologies

Abstract: The rapid increase in international trade and financial integration over the past decade and the growing importance of emerging markets in world trade and GDP have inspired the IMF to place stronger emphasis on multilateral surveillance, macro-financial linkages, and the implications of globalization. The IMF's Consultative Group on Exchange Rate Issues (CGER)--formed in the mid-1990s to provide exchange rate assessments for a number of advanced economies from a multilateral perspective--has therefore broadened its mandate to cover both key advanced economies and major emerging market economies. This Occasional Paper summarizes the methodologies that underpin the expanded analysis.

Where Did All The Borrowing Go? A Forensic Analysis of the U.S. External Position

Abstract: The deterioration in the US net external position in recent years has been much smaller than the extensive net borrowing associated with large current account deficits would have suggested This paper examines the sources of discrepancies between net borrowing and accumulation of net liabilities for the US economy over the past 25 years In particular, it highlights and quantifies the role played by net capital gains on the US external portfolio and ‘residual adjustments’ in explaining this discrepancy It discusses whether these ‘residual adjustments’ are likely to be originating from measurement errors in external assets and liabilities, financial flows, or capital gains, and explores the implications of these conjectures for the US financial account and external position

Fundamentals at Odds? The U.S. Current Account Deficit and the Dollar

Abstract: The real effective exchange rate of the dollar is close to its minimum level for the past 4 decades (as of September 2008) At the same time, however, the US trade and current account deficits remain large and, absent a significant correction in coming years, would contribute to a further accumulation of US external liabilities The paper discusses the tension between these two aspects of the dollar assessment, and what factors can help reconcile them It focuses in particular on the terms of trade, adjustment lags, and measurement issues related to both the real effective exchange rate and the current account balance