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- Title
The UK international investment position.
- Authors
Whitaker, Simon
- Abstract
This article looks at how the United Kingdom can, surprisingly, generate net investment income from net debt. The article explores the possible linkages between the improvement in net investment income and the stability of the sterling effective exchange rate index in the face of persistent trade deficits. It identifies some risks to net investment income from shifts in relative yields and a rise in global interest rates. With the rapid increase in cross-border asset trade, particularly in financial centres such as the United Kingdom, fluctuations in asset prices have become more powerful influences on our net debt position than in the past. Capital gains can stabilise a net external debt position even in the face of ongoing trade deficits, potentially reducing the extent of any adjustment to the exchange rate.
- Subjects
UNITED Kingdom; INTERNATIONAL finance; INVESTMENT income; FOREIGN exchange rates; CAPITAL gains; BALANCE of trade; CROSS border transactions
- Publication
Bank of England Quarterly Bulletin, 2006, Vol 46, Issue 3, p289
- ISSN
0005-5166
- Publication type
Article