Valuation Effects with Transitory and Trend Productivity Shocks
In the past two decades, cross-border portfolio holdings of a large variety of assets have risen sharply. This has created an important role for changes in asset prices of a country's external assets and liabilities (i.e. "valuation effec...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2010/01/11640417/valuation-effects-transitory-trend-productivity-shocks http://hdl.handle.net/10986/19945 |
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okr-10986-19945 |
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oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ADJUSTMENT COST ADJUSTMENT COST PARAMETER ADJUSTMENT COSTS ANNUAL GROWTH ASSET HOLDING ASSET POSITION ASSET PRICE ASSET PRICES BALANCE OF PAYMENTS BOND BONDS BUDGET CONSTRAINT BUDGET CONSTRAINTS BUSINESS CYCLE BUSINESS CYCLES CAPITAL FLOWS CAPITAL GAIN CAPITAL GAINS CAPITAL SHARE CAPITAL STOCK COMMUNICATION TECHNOLOGY CONSUMERS CONSUMPTION GOOD CONSUMPTION GROWTH CONSUMPTION SMOOTHING CREDIT MARKET CROSS-BORDER SECURITIES CURRENCY CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT SURPLUS DEPRECIATION DEPRECIATION RATE DEVELOPMENT ECONOMICS DIVIDEND DIVIDEND PAYMENT DIVIDEND PAYMENTS DIVIDEND YIELD DIVIDENDS DOMESTIC ECONOMY DOMESTIC EQUITY ECONOMIC ANALYSIS ECONOMIC GROWTH ECONOMIC RESEARCH ECONOMIC THEORY ELASTICITY EMERGING MARKET EMERGING MARKET BUSINESS EMERGING MARKETS EQUILIBRIUM EQUITY HOLDINGS EQUITY PORTFOLIOS EQUITY PRICES EXCESS RETURN EXCHANGE RATE EXCHANGE RATE FLUCTUATIONS EXCHANGE RATE MOVEMENTS EXCHANGE RATES EXCHANGE-RATE EXTERNAL ASSETS FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL ASSETS FINANCIAL INTEGRATION FINANCIAL MARKETS FOREIGN ASSET FOREIGN ASSET POSITION FOREIGN ASSETS FOREIGN EQUITIES FOREIGN EQUITY FOREIGN EXCHANGE FOREIGN EXCHANGE RATES FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FUTURE RESEARCH GDP GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GENERAL EQUILIBRIUM MODELS GLOBAL CURRENT ACCOUNT IMBALANCES GLOBAL IMBALANCES GLOBALIZATION GROWTH RATE GROWTH ¯ RATE HOME COUNTRY HOST COUNTRY IMBALANCES INCOMPLETE MARKETS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL FLOWS INTERNATIONAL DIVERSIFICATION INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INTERNATIONAL MONEY INTERNATIONAL PORTFOLIO INTERNATIONAL PORTFOLIOS INTERNATIONAL TRANSACTIONS INVESTING LABOR COSTS LABOR DEMAND LABOR SUPPLY LOCAL ECONOMY LOCAL MARKET LOW INTEREST RATES MACROECONOMICS MARGINAL UTILITY MARKET ACCESS MARKET STRUCTURES MONETARY ECONOMICS OPEN ECONOMY OUTPUT OUTPUT RATIO PERISHABLE GOOD PERMANENT INCOME PERSISTENT CURRENT ACCOUNT DEFICITS POLITICAL ECONOMY PORTFOLIO PORTFOLIO CHOICE PORTFOLIO CHOICES PORTFOLIO HOLDING PORTFOLIO HOLDINGS PORTFOLIOS PRICE INDEX PRICE RATIO PRODUCTIVITY PRODUCTIVITY GROWTH PURCHASING POWER PURCHASING POWER PARITY REAL ASSET RETURN RETURNS RISK AVERSION SECURITIES SHARE OF WORLD OUTPUT SHAREHOLDERS SHOCK TO INCOME STANDARD DEVIATION STANDARD DEVIATIONS STEADY STATE STOCK PRICE STOCK PRICES STOCKS TOTAL FACTOR PRODUCTIVITY TRADE BALANCE TRADING TURNOVER VALUATION VALUATION CHANGES VOLATILITY WAGES WEALTH |
| spellingShingle |
ADJUSTMENT COST ADJUSTMENT COST PARAMETER ADJUSTMENT COSTS ANNUAL GROWTH ASSET HOLDING ASSET POSITION ASSET PRICE ASSET PRICES BALANCE OF PAYMENTS BOND BONDS BUDGET CONSTRAINT BUDGET CONSTRAINTS BUSINESS CYCLE BUSINESS CYCLES CAPITAL FLOWS CAPITAL GAIN CAPITAL GAINS CAPITAL SHARE CAPITAL STOCK COMMUNICATION TECHNOLOGY CONSUMERS CONSUMPTION GOOD CONSUMPTION GROWTH CONSUMPTION SMOOTHING CREDIT MARKET CROSS-BORDER SECURITIES CURRENCY CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT SURPLUS DEPRECIATION DEPRECIATION RATE DEVELOPMENT ECONOMICS DIVIDEND DIVIDEND PAYMENT DIVIDEND PAYMENTS DIVIDEND YIELD DIVIDENDS DOMESTIC ECONOMY DOMESTIC EQUITY ECONOMIC ANALYSIS ECONOMIC GROWTH ECONOMIC RESEARCH ECONOMIC THEORY ELASTICITY EMERGING MARKET EMERGING MARKET BUSINESS EMERGING MARKETS EQUILIBRIUM EQUITY HOLDINGS EQUITY PORTFOLIOS EQUITY PRICES EXCESS RETURN EXCHANGE RATE EXCHANGE RATE FLUCTUATIONS EXCHANGE RATE MOVEMENTS EXCHANGE RATES EXCHANGE-RATE EXTERNAL ASSETS FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL ASSETS FINANCIAL INTEGRATION FINANCIAL MARKETS FOREIGN ASSET FOREIGN ASSET POSITION FOREIGN ASSETS FOREIGN EQUITIES FOREIGN EQUITY FOREIGN EXCHANGE FOREIGN EXCHANGE RATES FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FUTURE RESEARCH GDP GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GENERAL EQUILIBRIUM MODELS GLOBAL CURRENT ACCOUNT IMBALANCES GLOBAL IMBALANCES GLOBALIZATION GROWTH RATE GROWTH ¯ RATE HOME COUNTRY HOST COUNTRY IMBALANCES INCOMPLETE MARKETS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL FLOWS INTERNATIONAL DIVERSIFICATION INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INTERNATIONAL MONEY INTERNATIONAL PORTFOLIO INTERNATIONAL PORTFOLIOS INTERNATIONAL TRANSACTIONS INVESTING LABOR COSTS LABOR DEMAND LABOR SUPPLY LOCAL ECONOMY LOCAL MARKET LOW INTEREST RATES MACROECONOMICS MARGINAL UTILITY MARKET ACCESS MARKET STRUCTURES MONETARY ECONOMICS OPEN ECONOMY OUTPUT OUTPUT RATIO PERISHABLE GOOD PERMANENT INCOME PERSISTENT CURRENT ACCOUNT DEFICITS POLITICAL ECONOMY PORTFOLIO PORTFOLIO CHOICE PORTFOLIO CHOICES PORTFOLIO HOLDING PORTFOLIO HOLDINGS PORTFOLIOS PRICE INDEX PRICE RATIO PRODUCTIVITY PRODUCTIVITY GROWTH PURCHASING POWER PURCHASING POWER PARITY REAL ASSET RETURN RETURNS RISK AVERSION SECURITIES SHARE OF WORLD OUTPUT SHAREHOLDERS SHOCK TO INCOME STANDARD DEVIATION STANDARD DEVIATIONS STEADY STATE STOCK PRICE STOCK PRICES STOCKS TOTAL FACTOR PRODUCTIVITY TRADE BALANCE TRADING TURNOVER VALUATION VALUATION CHANGES VOLATILITY WAGES WEALTH Nguyen, Ha Valuation Effects with Transitory and Trend Productivity Shocks |
| relation |
Policy Research Working Paper;No. 5174 |
| description |
In the past two decades, cross-border
portfolio holdings of a large variety of assets have risen
sharply. This has created an important role for changes in
asset prices of a country's external assets and
liabilities (i.e. "valuation effects") in
affecting the country's net foreign asset position.
Valuation effects are commonly thought as stabilizing: they
counteract current account movements and mitigate the impact
of the current account on the country's net foreign
asset position. This paper shows that whether valuation
effects are stabilizing or not depends critically on the
nature of underlying productivity shocks. In response to
transitory shocks, valuation effects are stabilizing; but in
response to trend shocks, such effects amplify the impact of
the current account on the net foreign asset position. These
contrasting results arise because optimally smoothing
consumers respond differently to a transitory shock than to
a trend shock to income. The results are consistent with the
pattern of external imbalances between the United States and
other G.7 countries since the 1990s. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Nguyen, Ha |
| author_facet |
Nguyen, Ha |
| author_sort |
Nguyen, Ha |
| title |
Valuation Effects with Transitory and Trend Productivity Shocks |
| title_short |
Valuation Effects with Transitory and Trend Productivity Shocks |
| title_full |
Valuation Effects with Transitory and Trend Productivity Shocks |
| title_fullStr |
Valuation Effects with Transitory and Trend Productivity Shocks |
| title_full_unstemmed |
Valuation Effects with Transitory and Trend Productivity Shocks |
| title_sort |
valuation effects with transitory and trend productivity shocks |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2010/01/11640417/valuation-effects-transitory-trend-productivity-shocks http://hdl.handle.net/10986/19945 |
| _version_ |
1764444122471464960 |
| spelling |
okr-10986-199452021-04-23T14:03:52Z Valuation Effects with Transitory and Trend Productivity Shocks Nguyen, Ha ADJUSTMENT COST ADJUSTMENT COST PARAMETER ADJUSTMENT COSTS ANNUAL GROWTH ASSET HOLDING ASSET POSITION ASSET PRICE ASSET PRICES BALANCE OF PAYMENTS BOND BONDS BUDGET CONSTRAINT BUDGET CONSTRAINTS BUSINESS CYCLE BUSINESS CYCLES CAPITAL FLOWS CAPITAL GAIN CAPITAL GAINS CAPITAL SHARE CAPITAL STOCK COMMUNICATION TECHNOLOGY CONSUMERS CONSUMPTION GOOD CONSUMPTION GROWTH CONSUMPTION SMOOTHING CREDIT MARKET CROSS-BORDER SECURITIES CURRENCY CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT SURPLUS DEPRECIATION DEPRECIATION RATE DEVELOPMENT ECONOMICS DIVIDEND DIVIDEND PAYMENT DIVIDEND PAYMENTS DIVIDEND YIELD DIVIDENDS DOMESTIC ECONOMY DOMESTIC EQUITY ECONOMIC ANALYSIS ECONOMIC GROWTH ECONOMIC RESEARCH ECONOMIC THEORY ELASTICITY EMERGING MARKET EMERGING MARKET BUSINESS EMERGING MARKETS EQUILIBRIUM EQUITY HOLDINGS EQUITY PORTFOLIOS EQUITY PRICES EXCESS RETURN EXCHANGE RATE EXCHANGE RATE FLUCTUATIONS EXCHANGE RATE MOVEMENTS EXCHANGE RATES EXCHANGE-RATE EXTERNAL ASSETS FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL ASSETS FINANCIAL INTEGRATION FINANCIAL MARKETS FOREIGN ASSET FOREIGN ASSET POSITION FOREIGN ASSETS FOREIGN EQUITIES FOREIGN EQUITY FOREIGN EXCHANGE FOREIGN EXCHANGE RATES FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN INVESTORS FUTURE RESEARCH GDP GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GENERAL EQUILIBRIUM MODELS GLOBAL CURRENT ACCOUNT IMBALANCES GLOBAL IMBALANCES GLOBALIZATION GROWTH RATE GROWTH ¯ RATE HOME COUNTRY HOST COUNTRY IMBALANCES INCOMPLETE MARKETS INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL FLOWS INTERNATIONAL DIVERSIFICATION INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INTERNATIONAL MONEY INTERNATIONAL PORTFOLIO INTERNATIONAL PORTFOLIOS INTERNATIONAL TRANSACTIONS INVESTING LABOR COSTS LABOR DEMAND LABOR SUPPLY LOCAL ECONOMY LOCAL MARKET LOW INTEREST RATES MACROECONOMICS MARGINAL UTILITY MARKET ACCESS MARKET STRUCTURES MONETARY ECONOMICS OPEN ECONOMY OUTPUT OUTPUT RATIO PERISHABLE GOOD PERMANENT INCOME PERSISTENT CURRENT ACCOUNT DEFICITS POLITICAL ECONOMY PORTFOLIO PORTFOLIO CHOICE PORTFOLIO CHOICES PORTFOLIO HOLDING PORTFOLIO HOLDINGS PORTFOLIOS PRICE INDEX PRICE RATIO PRODUCTIVITY PRODUCTIVITY GROWTH PURCHASING POWER PURCHASING POWER PARITY REAL ASSET RETURN RETURNS RISK AVERSION SECURITIES SHARE OF WORLD OUTPUT SHAREHOLDERS SHOCK TO INCOME STANDARD DEVIATION STANDARD DEVIATIONS STEADY STATE STOCK PRICE STOCK PRICES STOCKS TOTAL FACTOR PRODUCTIVITY TRADE BALANCE TRADING TURNOVER VALUATION VALUATION CHANGES VOLATILITY WAGES WEALTH In the past two decades, cross-border portfolio holdings of a large variety of assets have risen sharply. This has created an important role for changes in asset prices of a country's external assets and liabilities (i.e. "valuation effects") in affecting the country's net foreign asset position. Valuation effects are commonly thought as stabilizing: they counteract current account movements and mitigate the impact of the current account on the country's net foreign asset position. This paper shows that whether valuation effects are stabilizing or not depends critically on the nature of underlying productivity shocks. In response to transitory shocks, valuation effects are stabilizing; but in response to trend shocks, such effects amplify the impact of the current account on the net foreign asset position. These contrasting results arise because optimally smoothing consumers respond differently to a transitory shock than to a trend shock to income. The results are consistent with the pattern of external imbalances between the United States and other G.7 countries since the 1990s. 2014-09-02T20:59:47Z 2014-09-02T20:59:47Z 2010-01 http://documents.worldbank.org/curated/en/2010/01/11640417/valuation-effects-transitory-trend-productivity-shocks http://hdl.handle.net/10986/19945 English en_US Policy Research Working Paper;No. 5174 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |