Discussion Paper Details

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Title: Do International Investment Income Flows Smooth Income?

Author(s): Philip R. Lane

Publication Date: March 1999

Keyword(s): Asset Trade, income-smoothing, international investment income flows and international investment positions

Programme Area(s): International Macroeconomics

Abstract: We explore some empirical properties of gross international investment positions. In order to provide income-smoothing, net investment income should negatively covary with GDP. Moreover, to maximize stabilization of GNP in the face of GDP fluctuations, the yield on foreign assets should move countercyclically and the yield on foreign liabilities procyclically. In both time-series and panel settings, we reject these hypotheses,suggesting that positive gross international investment positions are not associated with income-smoothing at business-cycle frequencies.

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Bibliographic Reference

Lane, P. 1999. 'Do International Investment Income Flows Smooth Income?'. London, Centre for Economic Policy Research.