The CFS International Capital Flow Database: A User's Guide∗
Contents
1. AV FDIL AV EGA AV EQL AV RES 18 3In the following we will omit the country subscript i for notational convenience 4 Additional changes particularly in the definition and reporting of transfers have also altered the scope of the current account so the redesignated terms are not directly comparable to their corresponding former definitions We derive the valuation changes AV by constructing purely flow based series for each component both with and without valuation adjustments and computing the difference between the adjusted and the unadjusted estimates Since the absolute level of balances brought forward determines the size of the valuation adjustment we anchor the flow based series through the earliest available IIP stock figure When this starting value is preceded by one or more of the available BOPS data points an initial value for the flow based series is computed by extrapolating the IIP starting value backwards with and without valuation adjustments respectively As a consequence the adjusted current account balance provides an alternative estimate on the change in NFA which can be used to fill the gaps induced by missing observations However in the case of interpolation we need to ensure that the interpolated segment meets its two attachment points Therefore the flow based increments in the NFA position are scaled as follows Observing stock data for N F A and NF Ap with t lt t and observing2. Peru Philippines Poland Romania Saudi Arabia Singapore South Africa Syria Thailand Tunisia Turkey Uruguay Venezuela Mean over 129 countries corr CA AN FA 0 65 0 48 0 52 0 33 0 56 0 20 0 66 0 89 0 84 0 50 0 85 0 82 0 79 0 56 0 80 0 66 0 60 0 81 0 69 0 64 0 31 0 71 0 75 0 79 0 86 0 80 0 70 0 70 0 69 0 79 0 98 0 23 0 08 0 87 0 89 0 24 0 28 0 23 0 83 0 65 14 corr ANF ACT ANFA 0 84 0 48 0 52 0 87 0 88 0 20 0 63 0 89 0 84 0 50 0 85 0 82 0 79 0 78 0 81 0 66 0 77 0 81 0 69 0 64 0 31 0 71 0 75 0 79 0 86 0 80 0 63 0 77 0 75 0 84 0 98 0 38 0 42 0 87 0 89 0 34 0 66 0 23 0 84 0 67 Figure 3 Debt Equitv Distribution 0 4 T T ISL NLD IT BAIOR 0 2 D br Nur GRA CHE USIAT Price Oil KOR JPN G a GRC Esp 0 2 AUS FIN 2 PRT T NZL 2 2 04 c LU 2 0 6 0 8 A l l l l l l 2 1 5 1 0 5 0 0 5 1 1 5 Net Debt Assets GDP a Industrial Countries 0 4 0 2 BWA a ot a ZAR BHR a TURG URI w 0 2 MRX a 8 HRV BI sa f 2 gat tit VEN oO a MLT z HUN oz z 0 6 EST 0 8 A l l l l l l 2 1 5 1 0 5 0 0 5 1 1 5 Net Debt Assets GDP b Emerging Markets 0 4 0 2 a r SEMEN BGD e PENN INBLAL an 02l Tao Ml Ega PA BEKAM lt gt 5 0 4l MDA MAR ae 2 THA pan KAZ o Z 0 6 VUT TUN 0 8 BOL A l l l l l l 2 1 5 1 0 5 0 0 5 1 1 5 Net Debt As
3. ASSETS EPS xxx 79AIDZF OI GEN GOVT ASSETS EPS xxx 79AHDZF OI MON AUTH ASSETS EPS xxx79AGDZF OI OTH SECT ASSETS EPS xxx 79AJDZF OTHER INVESTMENT LIAB EPS xxx79LFDZF OI BANKS LIAB EPS xxx79LIDZF OI GEN GOVT LIAB EPS xxx 79LHDZPF OI MON AUTH LIAB EPS xxx79LGDZF OI OTH SECT LIAB EPS xxx79LJDZF RESERVE ASSETS EPS 16 xxx79AKDGZF Name Table A 1 Source Variables continued Code International Financial Statistics stock data TOTAL RESERVES MINUS GOLD xxx LL DZF World Bank Global Development Finance 2005 stock data TOTAL DEBT STOCKS xxxDTDOD DECTCD IMF Direction of Trade Statistics flow data EXPORTS FOB IMPORTS CIF Name IMFCODE ISO3CODE COUNTRY DATE GDP NFA DVNFA NFACF DVNFACF CCA GFA GFL FDIA DVFDIA FDIL DVFDIL EQA DVEQA EQL DVEQL DEBTA DEBTL RESGOLD xxx70 DZDxxx xxx71 DZDxxx Table A 2 List of Variables Description Numerical country code IMF Alphanumerical country code 3 digit ISO Name of country Year of observation Nominal GDP in Million U S Dollar Net foreign asset NFA position Change in valuation of net foreign assets as the sum of valuation changes of components NFA position calculated from adjusted cumulative cur rent account Valuation change in cumulative current account Sum of valuation changes of components Cumulative current account Gross foreign assets Gross foreign liabilit
4. United States USA Uruguay URY Vanuatu VUT Venezuela VEN Zambia ZMB Zimbabwe ZWE 21 References Lane P R and Milesi Ferretti G M 2001 The External Wealth of Nations Mea sures of Foreign Assets and Liabilities for Industrial and Developing Countries Journal of International Economics 55 263 294 Lane P R and Milesi Ferretti G M 2006 The External Wealth of Nations Mark II Revised and Extended Estimates of Foreign Assets and Liabilities 1970 2004 Working Paper International Monetarv Fund Sinn S 1990 Net External Asset Positions of 145 Countries Estimation and Interpretation in Siebert H Ed Kieler Studien Tiibingen Mohr Vol 234 22
5. from a similar negative position but displav a substantial deterioration throughout the 1980 s with further subsequent decline and no major trend reversal Subfigure a also documents the fact that aggregate NFA of all countries is different from zero which is well known under the designation world NFA discrepancy Tables 1 and 2 displav the degree of commonalitv in different measures of capital flows For both industrial and non industrial countries the outcomes are verv similar to the figures presented in Lane and Milesi Ferretti 2001 2006 The left column of each table shows the correlation between the current account balance and the change in net foreign assets Since most of the difference between the flow figure and the increment in the stock series is caused bv the change in the value of the previous period s stock balance this number can also be interpreted as a measure for the impact of valuation adjustments In countries with high correlation coefficients the effect of valuation changes is relativelv low and vice versa On average the figures for non industrial countries are higher than for industrial countries However one has to bear in mind that this partly reflects the lack of appropriate indices for valuation adjustments in these countries rather than less volatile asset prices The right column of both tables shows the correlation between the two measures of capital flows constructed by using the different approaches
6. st t QA ts and liabilities as FDIL FDIL wrpris wri NFADIFR EQL EQL ez WEQL t wrt a NFADIFF DEBT L DEBT L wpesrit Wit NFADIF Fi with FDIL t GFL st I FIXP yt t Q 4 The consistency adjustment ensures that the relations 1 2 and 16 hold The valuation adjusted current account described above may not only be used for interpolation of gaps in the NFA position it also permits the construction of an entire NFA series based on BOPS flow figures In that case C A is cumulated over time NFAY NEAS GA 20 t t 1 t The initial value for this cumulative flow series is the earliest available stock figure for NFA which we take from Sinn 1990 For conceptual reasons assets and liabilities are also affected by negative transactions e g realized holding losses repayments and by difficulties in attributing transactions to residents vs non residents Therefore individual components and hence GFA and GFL could turn negative However this occurs in a few cases only 4 Data Characteristics The increase in international capital flows and stock positions clearly marks a global trend nonetheless it is necessary to distinguish between different developments across different groups of countries For this purpose we will distinguish between three groups of countries based on their degree of economic development and in accordance with the World Bank classification The group of i
7. 90 1995 2000 a Industrial Countries 1970 2003 2 57 1985 1990 1995 2000 b Non industrial Countries 1980 2003 11 Figure 2 Net Foreign Assets 0 4 0 2 4 0 6 l 4 0 8 f f l l l l 1970 1975 1980 1985 1990 1995 2000 All Industrial Countries 4 Emerging Markets Developing Countries a Aggregate NFA Aggregate GDP 0 4 0 8 l l l l l l 1970 1975 1980 1985 1990 1995 2000 0 All Industrial Countries 4 Emerging Markets Developing Countries b Mean of NFA GDP Ratios 12 Country USA UK Austria Denmark France Germany Italy Netherlands Norway Sweden Switzerland Canada Japan Finland Greece Iceland Portugal Spain Australia New Zealand Korea Mean Table 1 Correlations Industrial Countries corr CA ANFA 0 50 0 33 0 44 0 70 0 43 0 72 0 51 0 18 0 99 0 56 0 00 0 71 0 47 0 14 0 64 0 30 0 58 0 30 0 40 0 11 0 92 0 46 13 corr ANF AC ANFA 0 88 0 57 0 38 0 61 0 31 0 19 0 59 0 10 0 99 0 49 0 19 0 77 0 87 0 98 0 64 0 42 0 69 0 85 0 86 0 59 0 92 0 59 Table 2 Correlations Non industrial Countries Country Argentina Bangladesh Bolivia Brazil Bulgaria Cameroon Chile China Colombia Costa Rica Ecuador Egypt Guatemala Hungary India Indonesia Israel Jordan Kenya Malaysia Mexico Morocco Nicaragua Nigeria Pakistan Paraguay
8. The CFS International Capital Flow Database A User s Guide Christian J Offermannsi Goethe University Frankfurt Marcus Pramor C enter for Financial Studies Original Version July 2006 Current Version August 2007 Abstract This paper documents the methodology underlying the construction of a global database of gross foreign asset and liability positions for 153 countries over the period 1970 to 2004 and illustrates some key data characteristics The data cover both inflows and outflows of capital and thus allow for an assessment of the degree of international financial integration In addition to net foreign asset stocks we also provide details on the composition of the main asset and liability categories namely the foreign direct investment equity in vestment and debt components Finally we report on valuation changes as one of the main sources of discrepancy between transaction based capital flow data and stock values of investment positions The dataset is available for download at http www ifk cfs de fileadmin downloads data cfs icfd zip Keywords Net Foreign Assets Valuation Adjustment International Finan cial Integration JEL Classification F21 F34 F32 This paper is part of a research project with Michael Binder whom we thank for valuable advice at all stages of the project funded by the Center for Financial Studies CFS and the Deutsche Bundesbank All remaining errors and omissions are our own E
9. components in which case a calculation of total assets and total liabilities would not be meaningful In these instances the IIP based series are extrapolated bv use of the corresponding flow data from the BOPS provided the latter benefit from a more comprehensive data coverage In cumulating flow data valuation adjustments need to be made to ensure consistencv with the IIP series as the value of flow balances brought forward will change over time Valuation adjustments will be specific to individual asset and liabilitv classes as described in detail in the following subsection The asset and liability series for FDI and equity EQ conform with the HP clas sifications Debt assets DE BT A are the sum of the HP categories portfolio debt assets other assets and if applicable financial derivative assets Debt liabilities DEBTL are analogously calculated from portfolio debt liabilities other liabilities and financial derivative liabilities Since these IIP series are frequently not available for developing countries external debt figures from the GDF database are used in these cases Instead of the IIP series reserve assets we use the alternative IFS stock series total reserves minus gold RES since gold holdings do not constitute a li ability of any counterpart Hence our measures of gross foreign assets GF A and gross foreign liabilities GF L are constructed as follows GFAn FDIAy EQA DEBT A RES 1 Note tha
10. e GRC Grenada GRD Guatemala GTM Guvana GUY Haiti HTI Honduras HND Hong Kong HKG Hungary HUN Iceland ISL India IND Indonesia IDN Iran IRN Iraq IRQ Ireland IRL Israel ISR Italy ITA Jamaica JAM Japan JPN Jordan JOR Kazakhstan KAZ Kenya KEN Korea KOR Kuwait KWT Latvia LVA Lebanon LBN Lesotho LSO Liberia LBR Libya LBY Lithuania LTU Luxembourg LUX Madagascar MDG Malawi MWI Malavsia MVS Maldives MDV Mali MLI Malta MLT Mauritania MRT Mauritius MUS Mexico MEX Moldova MDA Morocco MAR Mvanmar MMR Namibia NAM Nepal NPL Netherlands NLD 19 Table A 3 List of Countries continued Name Code Netherlands Antilles ANT New Zealand NZL Nicaragua NIC Niger NER Nigeria NGA Norway NOR Oman OMN Pakistan PAK Panama PAN Papua New Guinea PNG Paraguay PRY Peru PER Philippines PHL Poland POL Portugal PRT Qatar QAT Romania ROU Russia RUS Rwanda RWA Samoa WSM Saudi Arabia SAU Senegal SEN Seychelles SYC Sierra Leone SLE Singapore SGP Slovak Republic SVK Slovenia SVN Solomon Islands SLB Somalia SOM South Africa ZAF Spain ESP Sri Lanka LKA St Lucia LCA St Vincent amp Grenadines VCT Sudan SDN Suriname SUR Swaziland SWZ Sweden SWE Switzerland CHE Syrian Arab Republic SYR Taiwan OAN Tanzania TZA Thailand THA Togo TGO Trinidad and Tobago TTO Tunisia TUN Turkey TUR Uganda UGA 20 Table A 3 List of Countries continued Name Code Ukraine UKR United Arab Emirates ARE United Kingdom GBR
11. es over the period 1970 2004 Our main source is the International Financial Statistics IFS online database by the International Monetary Fund IMF which provides the data series of the Balance of Payments Statistics BOPS and the Inter national Investment Position IIP For the net foreign assets NFA position only the IIP series are complemented through data points taken from Sinn 1990 for the period 1970 1987 Debt stock figures for developing countries are taken from the World Bank s Global Development Finance GDF database since these numbers are generally not available from the IIP series of the IFS For GDP the primary data source is the World Bank s World Development Indi cators database due to its comprehensive coverage These series are complemented by data points taken from the IFS Time series for the consumer price index CPI that enter the calculation of valuation adjustments to flow data are obtained from the IFS Similarly trade weighted real exchange rates of partner countries vis a vis the U S are calculated using trade data from the IMF s Direction of Trade Statistics and bilateral nominal exchange rates period averages from the IFS Equity indices which also enter the calculation of valuation adjustments are pri marily taken from Morgan Stanley Capital International Additional national and regional indices are obtained from Standard amp Poor s Nomura Datastream FTSE Global Property Research or direct
12. flow in period t and the change in the stock value is defined as AV FDIL it ae 1 FDI Lit 13 Gi t 1 with CPI it Aa PA es 14 a Gan na 14 Finallv we infer changes to the stock of international reserves excluding gold hold ings RES from the difference between the change in official reserves ARES according to IIP and recorded reserve flows DRES AV RES u ARES DRE Si 15 Since debt figures from the GDF database are available as stock data only separate series for valuation adjustments cannot be obtained 3 3 Net Foreign Asset Position When we derive separate total asset GF A and total liability GF L estimates from individual components as described above the calculation of the net foreign asset NFA position is straightforward Whenever this method is not feasible due to a lack of observations for gross figures the following option may be available Sinn 1990 had compiled an earlier database on NFA positions that covers 145 countries for the period from 1970 to 1987 This supplementary source is used to complement the data points calculated from total asset and total liability numbers In most instances combining these two sources will result in a data gap in the middle of the series The remaining gap can however be filled through interpolation based on the other supplementary source viz valuation adjusted flow figures This last approach is also used when only one of the two aforeme
13. ies Foreign direct investment FDI assets stocks consistent with NFA Change in valuation of consistent FDI asset stocks FDI liabilities stocks consistent with NFA Changes in valuation of consistent FDI liability stocks Equity assets stocks consistent with NFA Changes in valuation of consistent equity asset stocks Equity liabilities stocks consistent with NFA Changes in valuation of consistent equity liability stocks Debt asset stocks consistent with NFA Debt liability stocks consistent with NFA Reserves minus gold 17 Table A 3 List of Countries Name Afghanistan Algeria Antigua and Barbuda Argentina Armenia Australia Austria Bahamas Bahrain Bangladesh Barbados Belarus Belgium Belize Benin Bolivia Botswana Brazil Bulgaria Burkina Faso Burundi Cameroon Canada Central African Republic Chad Chile China Colombia Congo Republic Of Costa Rica Cote d Ivoire Croatia Cyprus Czech Republic Czechoslovakia Denmark Dominica Dominican Republic Ecuador Egypt El Salvador Equatorial Guinea Estonia Ethiopia Fiji Finland France Gabon 18 Code AFG DZA ATG ARG ARM AUS AUT BHS BHR BGD BRB BLR BEL BLZ BEN BOL BWA BRA BGR BFA BDI CMR CAN CAF TCD CHL CHN COL COG CRI CIV HRV CVP CZE CZS DNK DMA DOM ECU EGY SLV GNQ EST ETH FJI FIN FRA GAB Table A 3 List of Countries continued Name Code Gambia GMB Germanv DEU Ghana GHA Greec
14. ional investment position of each countrv we also include a series for gross domestic product GDP While this data set is based both on flows as reported in the balance of pavments and on international investment position stock data onlv stock data are presented Due to the conceptual equivalence of flows and the corresponding changes in stocks no information is lost bv onlv reporting the international investment position Apart from the effect of inadvertent accounting errors and omissions however there will be a discrepancv between flows and increments in stock variables resulting from changes in the valuation of flow balances brought forward from prior periods In fact one of the main contributions in compiling this database is the appropriate adjustment of flow figures that re establishes the conceptual equivalence Through complementing reported international investment position figures with valuation adjusted flows we are able to cover a larger number of countries and obtain longer data series than either concept by itself could provide The database has significantly benefited from pioneering work by Sinn 1990 and was conceptually inspired by Lane and Milesi Ferretti 2001 Lane and Milesi Ferretti 2006 now offer a data set of similar coverage 2 Data Sources A varietv of data sources has been drawn upon in compiling this data set We present annual estimates of gross and net international capital stocks for 153 coun tri
15. lly moved from a slightly positive to a Slightly negative position over time In contrast emerging markets rose to a period of positive balances lasting from the mid 1970 s to the mid 1980 s from an otherwise negative position while developing countries started from a visibly negative position and experienced minor further deterioration over time However the series are all contained within a relatively close range with only moderate dispersion and no discernible trends The means of individual NFA GDP ratios Figure 2 b instead document larger differences between country groups As these series give equal weight to all group members and are not dominated by large economies they better reflect developments affecting the majority of countries within a given group Based on group means industrial countries exhibit an almost entirely negative position over the sample period while both the rise and the subsequent fall experienced by See http go worldbank org D7SNOB8YUO as of April 26 2006 TSubfigures a and b are based on the series for 22 industrial countries and 48 non industrial countries respectively as all other countries do not have sufficiently complete component series Note that data points prior to 1980 are only available for a small number of these countries such that the representation would be severely distorted by including these observations emerging markets are much more pronounced Developing countries still start
16. ly from national stock exchanges For Japan the UK and the U S separate world equity indices are used that omit the domestic countrv in each case Tables providing more details on the source data series are shown in Appendix A 3 Construction of Stock Data 3 1 Gross Asset and Liability Components The guiding principle in building this database has been to obtain estimates of gross foreign asset and gross foreign liability components whenever data quality permits Not only do these components allow the calculation of total foreign assets and total foreign liabilities but they can also provide important information on a country s financial structure and changes in economic activity Subsequently some missing GDP observations were filled through data points from the recently published Lane and Milesi Ferretti 2006 who generally rely on many different data sources The same holds for the NFA series of Hong Kong in which the new data points replace BOPS as the basis for complementing Sinn 1990 and IIP data For details on the construction procedure see the following section To this end the different data sources are emploved according to a consistent pecking order When the level of detail in the reporting of individual asset and liabilitv components is high enough stock data from the IIP section of the IFS are used However IIP series are generallv available onlv from the 1980s onwards and mav omit too manv of the individual
17. mail offermanQwiwi uni frankfurt de E mail pramorQifk cfs de 1 Introduction Economic interaction has become an increasinglv international phenomenon charac terized by markedly growing flows of trade and capital As international pavments and investment positions claim a growing share of both corporate and national bal ance sheets thev also inevitablv impact domestic financial variables and the level and composition of economic activitv This development demands appropriate con sideration in both theoretical and applied research and it is to this end that we have endeavored to properlv capture and report international capital and financial flows and international investment positions This user s guide is intended to describe and explain the data series reported in the corresponding data file which can be found at http www ifk cfs de fileadmin downloads data cfs icfd zip We provide information not onlv on the size of the external investment position on a gross and net basis but also on its composition according to asset class as far as data availabilitv permits Total assets and liabilities are hence consistentiv built up as the sum of their components i e foreign direct investment FDI equitv and debt In addition international reserves are included on the asset side after subtracting gold holdings since the latter do not constitute a liabilitv of anv counterpart To provide an indicator of the relative magnitude of the internat
18. ndustrial countries includes high income OECD countries while emerging markets captures high income non OECD countries and upper middle income countries The third group developing countries consists of lower middle or low income countries Figure 1 shows the development of gross asset and liability positions over time for these country groups Industrial countries Figure 1 a display a strong growth of capital stocks for all categories amounting to an increase in the group s NFA GDP mean ratio from about 50 in 1970 to more than 250 in 2003 We combine the other two groups which are summarized in Figure 1 b and display a simi lar trending behavior However they experienced strong flows of capital already at the beginning of the sample until the 1980s comprising mostly debt liabilities which is of course partly due to the major role of foreign credit in many developing countries government budgets In addition there has been a big increase also in FDI liabilities Altogether capital stock positions of non industrial countries built up mainly after the sequence of financial crises that occurred in the 1990s when markets regained confidence in the stability of their financial system Figure 2 compares the differences in relative NFA positions between different country groups over time The series of aggregate NFA scaled by aggregate GDP Figure 2 a show that industrial countries have gradua
19. ntioned NFA sources is available in which case the valuation adjusted flow figures are used for extrapolation instead of interpolation In using flow figures from the BOPS we exploit the fact that the sum of domestic balances on current and capital account over a particular period will amount to the change in the international investment position of that economy provided that the valuation adjustments of all international investment components are taken into account Since both flows and international investment positions in this database are classified in accordance with the fifth edition of the Balance of Payments Manual BOPM published by the IMF it is worth noting that there have been some changes in definitions relative to earlier editions of the BOPM in order to harmonize the reporting practice with the System of National Accounts Most importantly what had formerly been known as the capital account has been redesignated as the capital and financial account As a consequence the current account balance C A and the balance on capital account KA within the capital and financial account do not conceptuallv offset each other anv longer instead the sum of the two represents the net lending or net borrowing of an economy Therefore the final adjusted flow figure is computed as CA CA KA ANY 17 where ANV represents the sum of available net valuation changes of asset and liability components ANV AV FDIA
20. outlined in Section 3 3 Here a high correlation coefficient indicates a high degree of empirical equiva lence between accumulated flows and extrapolated stocks Although the correlation figures are usually larger than those in the left column especially for industrial countries the correlation in many cases is still far from unity In a last step we separately identify each country s net debt and net equity includ ing FDI position in the most recent period available Figure 3 For the group of industrial economies this comparison reveals that the majority of countries display a positive net equity but a negative net debt asset position with a net equity net debt correlation coefficient of 0 16 So it would seem that from a national per spective external borrowing is used for maintaining a foreign equity portfolio Both emerging markets and developing countries instead virtually always show a negative net equity balance in the vast majority of cases coupled with negative net debt assets However among emerging markets there is a positive correlation of 0 27 between the two asset categories while for developing countries the correlation is 0 37 This suggests that depending on the stage of development countries either face a trade off between debt and equity financing or are allowed to use the two instruments as complements 10 Figure 1 Sum of Gross Asset and Liabilitv Stocks 2 5 0 5 1970 1975 1980 1985 19
21. ow of FDI assets into country 4 i e an outflow of capital in period t AV F DIA jz is the change in the value of the FDI asset stock as of the end of period t 1 during period t with AV FDIA a 1 RDAs 8 Gi t 1 Note that for the U S Japan and the UK we use an index that excludes the respective home country where CPI f da 200 oh EEA kI 9 CPI is the consumer price index and sj is country j s exchange rate in U S Dollar per unit of domestic currency The weight 10 is calculated as a predetermined moving average of country i s trade i e the sum of exports EX P and imports IMP with country j relative to country i s total trade for each year or specifically 1 t 1 Wijt Wijs 10 s t T where EX P js IM Fis SIL 11 ER EX Pigs IM Pixs Wijs and the span is set to T 3 We thus assume that a country s foreign direct investment flows are in line with its trade pattern and that changes in the foreign direct investment position that country holds in country 7 are due to changes in the relative price of consumption goods between country j and the U S as well as changes in the value of country j s currency relative to the U S Dollar FDI liabilities are adjusted in the same vein using country s real Dollar exchange rate giz such that AF DIL DF DIL AV FDIL iz 12 where DF DIL denotes the inflow of FDI liabilities into country 4 i e a capital in
22. sets GDP c Developing Countries 15 Appendix A Tables Table A 1 Source Variables Name Code Balance of Payments Statistics BOPS flow data CURRENT ACCOUNT N LE Xxx78ALDZEF CAPITAL ACCOUNT N LE xxx 78BCDZF DIRECT INVESTMENT ABROAD xxx78BDDZF DIR INVEST IN REP ECON N LE xxx78BEDZF PORTFOLIO INVESTMENT ASSETS xxx 78BFDZF PORTFOLIO INVESTMENT LIAB N LE xxx78BGDZF PI EQUITY SECURITIES ASSETS xxx78BKDZF PI EQUITY SECURITIES LIAB xxx78BMDGZF PI DEBT SECURITIES ASSETS xxx 78BLDZF PI DEBT SECURITIES LIAB xxx 78BNDGZF FINAN DERIVATIVES ASSETS xxx78BWDGZF FINAN DERIVATIVES LIABIL xxx78BXDZF OTHER INVESTMENT ASSETS xx x78BHDZEF OTHER INVESTMENT LIAB N LE xxx78BIDZF NET ERRORS AND OMISSIONS xxx78CADZEF RESERVE ASSETS xxx79DBDGZF International Investment Position IIP stock data FIN ACCT TOTAL ASSETS EPS xxx 79AADZF FIN ACCT TOTAL LIAB EPS xxx 79LADZEF DIRECT INVESTMENT ABROAD EPS xxx 79ABDZF DIRECT INV IN REP ECONOMY EPS xxx79LBDZF PORTFOLIO INVESTMENT ASSETS EPS xxx QACDZE PORTFOLIO INVESTMENT LIAB EPS xxx 9LCDZEF PI EQUITV SECURITIES ASSETS EPS xxx19ADDZP PI EQUITV SECURITIES LIAB EPS xxx79LDDZF PI DEBT SECURITIES ASSETS EPS xxx 79AEDZF PI DEBT SECURITIES LIAB EPS xxx19LEDZP FINAN DERIVATIVES ASSETS xxx 79ALDZEF FINAN DERIVATIVES LIABIL xxx 79LLDZF OTHER INVESTMENT ASSETS EPS xxx 79AFDZF OI BANKS
23. t unlike the gross foreign assets and gross foreign liabilities figures directly reported by the IIP we employ strict criteria for determining whether the number of individual components available permits the calculation of dependable total foreign assets and total foreign liabilities figures These aggregates are calculated only if all of the three components FDI equity and debt are simultaneously available on both the asset and the liability side However even when meaningful gross asset and liability estimates cannot be calculated from the available data series it may nonetheless be possible to construct a net foreign asset position as outlined below 3 2 Valuation Adjustment When flow data are used to extrapolate stock positions the change in value of the balances brought forward needs to be added to the flow figure in every period Since the value of different components of the international investment position is determined by different factors these differences also need to be reflected in the calculation of valuation adjustments While any attempt of such marking to market will necessarily be imperfect neglecting it altogether would not only be wrong on conceptual grounds but could also lead to severe distortions in practice In some cases the valuation effect may more than offset the contribution of the flow figure for that period thereby not only altering the magnitude but also the sign of the change in the corresponding s
24. the valuation adjusted current account C A with s t 1 t 2 t we obtain the missing values for NFA between t and t as NFA NFA Y CAt dyy s t Lt 2 t 19 r t l where dy 4 NF Av NFA yen C A Missing values at the beginning or at the end of the sample are filled in the same manner by using extrapolation i e with dy 0 The NFA position of a country may deviate from the difference between gross for eign assets and liabilities calculated from individual components Let us denote stock data which are based on the aggregation of components and the respective component itself by an asterisk Then we have NFADIFF NFA NFA where NF A is computed as the difference between GFA FDIA EGA DEBT A RES and GFL FDIL EQL DEBT L To adjust the underlying gross stock figures accordingly we distribute the difference across components to obtain estimates that are consistent with net figures Hence we apply the following scheme GFA GFA war NFADIFFi GFL GFL wis NFADIF Fi where GFA RES GFA RESI IGFL A WA t The gross stock figures of the components are adjusted in the same manner com puting assets as FDIA FDIA wppras Wax NFADIFF EQA EQA WEQA t 2 wat NFADIFF DEBTA DEBT At sippsrar way NFADIFE with FDIA EQA w aa SANN w AAA A WDEBTAt l WFDIAt WEQA FDIA t IGF A RES EQA t IGFA RES
25. tock position For this purpose we follow the lead provided in Lane and Milesi Ferretti 2001 and calculate comparable valuation adjustments Equity assets domestic holdings of foreign equity shares are adjusted by changes in the MSCI World Index m assuming that equity investment abroad is allocated according to the world portfolio that is approximated by this index Decomposing the change in the stock as above into AEQA DEQA 4 AV EQA it 3 where A is the first difference operator and DEQA refers to the inflow of equity assets into country in period t we take the change in the value of the stock as 1 DEQAn 4 t 1 mn AV EQA u a 1 EQAira mMi 1 taking into account that m refers to end of period values whereas flows are assumed to be evenly distributed over the year and hence adjusted for the average index value of VIT Equity liabilities foreign holdings of domestic equity shares are adjusted by changes in domestic or regional stock market indices m in the same vein as equity assets with AEQL DEQLi AV EQL it 5 DEQL denoting the flow of equity liabilities to country in period t and Mit Mit AV EQL i 1 EQLit 1 DEQLUix 6 Q f ge Q EIF Mit Ni t 1 Q l FDI assets are adjusted for changes in the real trade weighted Dollar exchange rate of country 2 s trade partners dit AFDIA DF DIA AV FDIA iz 7 where DF DI A is the infl
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