Lane, Philip R.; Milesi-Ferretti, Gian Maria - C.E.P.R. Discussion Papers - 2002
We examine the link between the net foreign asset position, the trade balance and the real exchange rate. In particular … into two mechanisms: the relation between external wealth and the trade balance; and, holding fixed other determinants, a … negative relation between the trade balance and the real exchange rate. We also provide additional evidence that the relative …