The Relationship between Net Foreign Assets Positions and Financial Development – Cases from Developing Countries in Asia

Abstract

This research examines the relationship between the net foreign asset position (NFA) and financial development of ten developing countries in Asia over the period 1973-2013. Using the Pooled Mean Group (PMG) method, the research results provide empirical evidence that financial development (measured through private credit/GDP ratio and bank credit to bank deposit ratio) contributes to the reduction in the net foreign asset position in the long run of a country, thus reducing the current global imbalance.