DP3769 International Financial Integration

Author(s): Philip R. Lane, Gian Maria Milesi-Ferretti
Publication Date: February 2003
Keyword(s): capital flows, international financial integration, rates of return
JEL(s): F21, F34
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3769

In recent decades, foreign assets and liabilities in advanced countries have grown rapidly relative to GDP, with the increase in gross cross-holdings far exceeding the size of net positions. Moreover, the portfolio equity and FDI categories have grown in importance relative to international debt stocks. In this Paper, we describe the broad trends in international financial integration for a sample of industrial countries, and seek to explain the cross-country and time-series variation in the size of international balance sheets. We also examine the behaviour of the rates of return on foreign assets and liabilities, relating them to ?market? returns.