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SUMMARY:Explaining External Asset Allocation: A Multi-Country Model with P
 reference Heterogeneity - Sergejs Saksonovs\, Faculty of Economics
DTSTART:20100507T160000Z
DTEND:20100507T170000Z
UID:TALK24712@talks.cam.ac.uk
CONTACT:Rachel Marston
DESCRIPTION:One of the most defining features of economic development in t
 he past twenty years has been the growth in cross-border financial asset h
 oldings. This paper proposes a microfounded\, multi-country model with end
 ogenous external asset allocation and preference heterogeneity in consumpt
 ion tastes. The model is solved by generalising the method for determining
  country asset portfolios proposed by Devereux and Sutherland (2008) to as
 sets denominated in different currencies and multiple countries. The resul
 ting model yields a rich set of theoretical results relating country portf
 olios to macroeconomic fundamentals and consumption preferences. It is the
  first to replicate observed patterns of asset allocation not only across 
 asset classes\, but also countries. Notably\, the model replicates positiv
 e net holdings of equity and negative net holdings of debt securities for 
 the US and the UK\, matched by negative net holdings of equity and positiv
 e net holdings of debt securities for the Asian region. It also replicates
  the disproportionate share of the UK issued debt securities in debt secur
 ity portfolios of other regions\, endogenously yielding its role as a fina
 ncial centre.
LOCATION:Winstanley Lecture Hall\, Trinity College
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