International capital flows, portfolio composition, and the stability of external imbalances

摘要

This paper develops a simple and tractable model of net capital flows in which time-varying gross country portfolios are an essential element in current account imbalances. The main constituents of country portfolios in the model are general derivatives, which could be interpreted as nominal bond assets and liabilities in particular. Under very weak conditions, the world wealth distribution is stationary. Stationarity is generated by movements in derivative (i.e., bond) risk-premia such that the return on a debtor country's gross liabilities is less than the return on its gross assets. This is well known feature of the US international investment position. We also provide suggestive evidence that a similar property holds more widely for a sample of advanced and emerging market countries. (c) 2020 Elsevier B.V. All rights reserved.