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The Valuation Channel of External Adjustment
Social Science Research Network
International financial integration has greatly increased the scope for changes in a country's net foreign asset position through the "valuation channel" of external adjustment, namely capital gains and losses on the country's external assets and liabilities. We examine this valuation channel theoretically in a dynamic equilibrium portfolio model with international trade in equity that encompasses complete and incomplete asset market scenarios. By separating asset prices and quantities in thedoi:10.2139/ssrn.1559369 fatcat:2hfrssgtqvh53moun2lo6tgv6q