Cross-border Portfolios : Assets, Liabilities, and Non-flow Adjustments

We document patterns of cross-border asset and liability positions, focusing on EME Asia and a five-year period around the global financial crisis. On EME Asia's external portfolio, we calculate cumulative five-year losses – or, more accurately, negative non-flow adjustments – of almost $600 billion. The “losses” are quite small relative to GDP, amounting to only 1% of GDP on the asset side. “Losses” are relatively small in part because of the substantial home bias in portfolios – the external portion of EME Asia's portfolios is small – but also because of modest average annual returns on foreign equities and foreign bonds.Full publication: 'http://ssrn.com/abstract=2668657' Cross-Border Financial Linkages: Challenges for Monetary Policy and Financial Stability