1. Discussion of The External Wealth of Nations Mark II by Philip Lane and Gian Maria Milesi-Ferretti Comments by Manuela Goretti University of Warwick April 29, 2006 University of Wisconsin, Madison

2. Outline Dataset and main stylised facts Measurement error and data availability

3. The dataset Data on foreign assets and liabilities, classified by asset type (debt, portfolio equity, FDI) Extension of their 2001 IJE paper

4. Important contribution “ Global ” dataset: Updated: end-date from 1998 up to 2004 Country coverage: from 67 to 145 countries Rigorous methodology Stock estimates: direct and cumulative flow measures Possible to detect under/over-reporting instances by cross-checking estimates and bilateral data from portfolio survey Attention to valuation adjustments

5. Key stylised facts Greater financial globalization, especially in ICs Composition of assets and liabilities Debt liabilities for major debtors (e.g. US, UK) Equities liabilities (FDI and valuation changes) for EMs Large external imbalances Role of the valuation channel in the discrepancy between CA and changes in NFAs

6. Limits from data availability Still few observations for several countries Value of cross-sectional versus time- series analysis Data availability at a quarterly frequency for IC group?

7. Direction of flows Bilateral data on NFA (Coordinated Portfolio Investment Survey: 71 reporting countries) Measurement error and importance of greater data availability on financial derivatives and transactions via offshore centers

8. Returns Access to data on returns by asset class Insight on portfolio composition as well as returns differentials across asset categories and countries

9. The valuation channel Figures for valuation effects Sign and magnitude Details on components of changes in the country international investment position (e.g. data released by the Department of Commerce)

10. The valuation channel (cont ’ d)

11. Conclusion Essential resource for empirical applications and in general for a better understanding of international markets Scope for further extensions and updates as new data becomes available