A Global Perspective on External Positions

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, investment income flows, and capital gains) for major external creditors and debtors. It also examines the factors driving the foreign asset portfolio of international investors, with a special focus on the weight of U.S. liabilities in the rest of the world’s stock of external assets. Finally, it relates the empirical evidence to the current debate about the roles of portfolio balance effects and exchange rate adjustment in shaping the external adjustment process.

including © notice, is given to the source. Losing our Marbles in the New Century? The Great Rebalancing in Historical Perspective

Foundation for its support. The paper was prepared whilst Taylor was a Visiting Professor at London Business School, and Taylor thanks LBS for its support. Meissner thanks the Bank of England staff for valuable conversations. We also thank Michael Bordo and Maurice Obstfeld for helpful discussions