02142cas a2200253 a 4500 AALejournalIMF018367 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484349922 1018-5941 BD-DhAAL BD-DhAAL Adler, Gustavo. The Stabilizing Role of Net Foreign Asset Returns / Gustavo Adler, Daniel Garcia-Macia. Washington, D.C. : International Monetary Fund, 2018. 1 online resource (33 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students With the rapid growth of countries' foreign asset and liability positions over the last two decades, financial returns on those positions ('NFA returns') have become material drivers of current accounts and net stock positions. This paper documents the relative importance of NFA return versus trade channels in driving NFA dynamics, for a sample of 52 economies over 1990-2015. While persistent trade imbalances have been a strong force leading to diverging NFA positions, NFA returns have played an important stabilizing role, mitigating NFA divergence. The stabilizing role of NFA returns primarily reflects the response of asset prices, rather than yield differentials or exchange rates. There is also evidence of heterogeneity in the speed of NFA adjustment, with emerging market economies adjusting more rapidly than advanced economies, and reserve-currency countries adjusting more slowly than others. The paper also documents the role of NFA returns as insurance against domestic and global income shocks, with a focus on reserve-currency countries. Mode of access: Internet Garcia-Macia, Daniel. IMF Working Papers; Working Paper ; No. 2018/079 Full text available on IMF http://elibrary.imf.org/view/journals/001/2018/079/001.2018.issue-079-en.xml IMF e-Library