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Stocks, Flows, and Valuation Effects of Foreign Assets and Liabilities: Do They Matter?



STOCKS, FLOWS, AND VALUATION EFFECTS OF FOREIGN ASSETS AND LIABILITIES: DO THEY MATTER? 237 STOCKS, FLOWS, AND VALUATION EFFECTS OF FOREIGN ASSETS AND LIABILITIES: DO THEY MATTER? Alfredo Pistelli Central Bank of Chile Jorge Selaive Central Bank of Chile Rodrigo O. Valdés Central Bank of Chile Globalization has changed the way countries interact along several dimensions. Financial integration and its underpinnings are probably among the most important. Although cross-border capital flows and external debt have been closely monitored, until recently little was known about the stocks of foreign assets and liabilities accumulated by various countries, especially in the developing world. In this respect, Lane and Milesi-Ferretti (2001, 2006) made an important contribution by assembling a comprehensive data set for 145 countries over the period 1970–2004.1 According to these 1. Previous contributions include Sinn (1990) and Rider (1994). Rider builds a data set for the period 1970–87, which misses the effect of the significant increase of cross-border capital flows in the last decade. Official data are also scarce. Data on international investment positions have been published by the International Monetary Fund (IMF) in recent years for most industrial countries, but only for a few developing countries. For the latter group, IMF stock data are generally available only for gross external debt and foreign exchange reserves. Current Account and External Financing, edited by Kevin Cowan, Sebastián Edwards, and Rodrigo O. Valdés, Santiago, Chile. © 2008 Central Bank of Chile. We thank Federico Sturzenegger, Luis Felipe Céspedes, and Kevin Cowan for their comments, the Balance of Payment Department of the Central Bank of Chile for preparing a unique database on quarterly series of the international investment position, and Sebastián Edwards and César Calderón for kindly facilitating their databases on current-account reversals and the real exchange rate, respectiv

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