Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71888
Authors: 
Peter, Alexandra
Year of Publication: 
2010
Series/Report no.: 
Bonn Econ Discussion Papers 21/2010
Abstract: 
This paper analyzes the relationship between bilateral trade flows, trade openness, and asset holdings in a three-country stochastic general equilibrium model. The threecountry model set-up enables me to disentangle and separate the effects bilateral trade flows and trade openness have on bilateral portfolio patterns. I find that both factors independently influence bilateral asset holdings. Higher bilateral trade as well as higher trade openness lead to a higher bilateral foreign asset position. Furthermore, the two factors show an interaction effect, where increasing trade openness diminishes the influence of bilateral trade flows on asset holdings. I provide supporting empirical evidence for these theoretical findings using a data set on the geographical composition of international portfolio holdings.
Subjects: 
International Portfolio Holdings
Bilateral Trade Flows
Trade Openness
JEL: 
F10
F30
F41
Document Type: 
Working Paper

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