-1
$\begingroup$

I am currently reading about Capital Flows and the theory states that net foreign assets are domestic holdings of foreign assets minus foreign holding of domestic assets.

An example of cross-border trade is given. A Swiss buys a car from the US. He sells CHF to get USD, which is the currency the seller in the US wants.

When talking in terms of countries, Switzerland sells CHF and gets USD. Therfore my though process is, Switzerland selling CHF for USD is an increase in foreign assets held domestically (by Switzerland) but at the same time foreign holding of domestic assets increase as the US now holds CHF...

Now I think the term of net foreign assets has not changed, which I think is wrong. What am I missing?

$\endgroup$

Your Answer

By clicking "Post Your Answer", you acknowledge that you have read our updated terms of service, privacy policy and cookie policy, and that your continued use of the website is subject to these policies.

Browse other questions tagged or ask your own question.