TY  - JOUR
AU  - Kraay,Aart
AU  - Loayza,Norman
AU  - Serven,Luis
AU  - Ventura,Jaume
TI  - Country Portfolios
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7795
PY  - 2000
Y2  - July 2000
UR  - http://www.nber.org/papers/w7795
L1  - http://www.nber.org/papers/w7795.pdf
N1  - Author contact info:
Aart Kraay
The World Bank Group
Mail Stop MC3-301
1818 H Street NW
Washington, DC 20433
Tel: 202 473-5756
Fax: 202 522-3518
E-Mail: AKraay@worldbank.org

Norman Loayza
The World Bank
1818 H St., NW
Washington, DC 20433
E-Mail: nloayza@worldbank.org

Luis Serven
The World Bank
1818 H St NW
Washington DC 20433
Tel: 202 473 7451
E-Mail: lserven@worldbank.org

Jaume Ventura
CREI
Universitat Pompeu Fabra
Ramon Trias Fargas, 25-27
08005-Barcelona
SPAIN
Tel: +34 93 542 1765
Fax: +34 93 542 1860
E-Mail: jventura@crei.cat
AB  - How do countries hold their financial wealth? We construct a new database of countries' claims on capital located at home and abroad, and international borrowing and lending, covering 68 countries from 1966 to 1997. We find that a small amount of capital flows from rich countries to poor countries. Countries' foreign asset positions are remarkably persistent, and mostly take the form of foreign loans rather than foreign equity.  To interpret these facts, we build a simple model of international capital flows that highlights the interplay between diminishing returns, production risk and sovereign risk. We show that in the presence of reasonable diminishing returns and production risk, the probability that international crises occur twice a century is enough to generate a set of country portfolios that are roughly consistent with the data.
ER  -