Return on foreign assets partly offsets trade imbalances – research
Emerging economies can recover from current account disequilibrium faster than reserve currency issuers
Return on net foreign assets (NFAs) has become a meaningful tool for correcting structural imbalances derived from trade, and to combat local and external income shocks, research published by the International Monetary Fund says.
In The Stabilizing Role of Net Foreign Asset Returns, Gustavo Adler and Daniel Garcia-Macia analyse the rapid expansion of foreign asset and liability positions in 52 economies between 1990 and 2015. These assets grew from 60% to 160% of global GDP over the period.
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