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Jorge Silva
 
''Determinants of the structure of external funding: the Portuguese case''
( 2020, Vol. 40 No.3 )
 
 
This study assesses the structure of the Portuguese international investment position (IIP) between 1999 and 2014. Increasing external imbalances after the introduction of the euro raised concerns on the composition of external funding. Portugal had the most negative IIP among the founding members of the euro area. We estimate the determinants of changes in the categories and instruments of the IIP liabilities. Both external and domestic factors had an effect on the structure of the external funding. External factors were the financial integration in the euro area, financial stress in Europe, the 3-month Euribor interest rate, the exchange rate and the US stock market. The Portuguese 10-year sovereign yield and trade balance were the domestic factors. Regarding policy implications, Portugal should improve the IIP through a combination of different measures. Decreasing debt instruments in favour of equity instruments would be desirable to share risk with foreign investors. A positive current account requires a positive trade balance and secondary income account to offset the negative primary income account.
 
 
Keywords: equity and debt instruments, financial integration, Portugal, international investment position, economic and financial adjustment programme
JEL: F3 - International Finance: General
F4 - Macroeconomic Aspects of International Trade and Finance: General
 
Manuscript Received : Apr 15 2020 Manuscript Accepted : Aug 08 2020

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