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This international mobility of capital implies that each country may have either a positive, negative or balanced foreign asset position.
Capital flows outward and Spain improves its net foreign asset position.
Since, net foreign asset position consists of the change in the price of foreign asset and liabilities and the current account balance.
The first phase of consolidation is dominated by a significant asset demand decline leading to an excess of asset supply and, thus, a decrease in net foreign asset position.
This implies that the nominal interest rate paid or received by home investors is given by (R_{t}^{ecb}exp (-psi _{d}(d_{t}-bar{d})/Y_{t})), with (psi _{d}>0), where (d_{t}equiv D_{t}/P_{At}), (D_{t}) is the home country's nominal net foreign asset position and d_{t}/Y_{t}) is the ratio of net foreign debt over output.
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Investors in those economies are likely to begin accumulating large net foreign asset positions (another throwback to the world before the first world war).Having discussed trends in the stock of capital, Mr Piketty turns to a discussion of the return on those stocks.
Some studies (Gourinchas and Rey 2007; Blanchard et al. 2005) dictate that real adjustment and financial adjustment are necessary for global financial or balance sheet correction because of the change in countries' net foreign asset positions.
Today the world aggregate current account balances as a share of global output are twice as large as in mid-1980s, while the net foreign asset positions have boosted up threefold (Bracke et al. 2010).
Therefore, when the euro depreciates, there are positive valuation effects in the German net foreign assets position.
The German net foreign-asset position is long in foreign currency (i.e., foreign currency-denominated external assets plus domestic-currency-denominated external liabilities are larger than domestic-currency-denominated external assets plus foreign-currency-denominated external liabilities).
In order to make a simple test on the robustness of our results, we have collected data on actual disposable income Gini coefficient (Fig. 7) and on the net foreign asset (NFA) position (Fig. 8) for Spain, during the consolidation process.
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