Net International Investment Position (NIIP)
What Is a Net International Investment Position (NIIP)?
A net international investment position (NIIP) measures the gap between a nation's stock of foreign assets and a foreigner's stock of that nation's assets. Basically, it tends to be seen as a nation's balance sheet with the remainder of the world at a specific point in time.
Understanding a Net International Investment Position (NIIP)
NIIP incorporates overseas assets and liabilities held by a nation's government, the private sector, and its residents. The NIIP is closely resembling net foreign assets (NFA), which decides if a country is a creditor or debtor nation by measuring the difference in its outer assets and liabilities.
Most nations release NIIP figures quarterly. In the NIIP, assets are isolated into direct investment, portfolio investment, other investment, and reserve assets, which incorporate foreign currencies, gold, and special drawing rights. Liabilities are reported with a similar classification, with the exception of "reserve assets," which have no equivalent on the liabilities side.
Why a Net International Investment Position (NIIP) Is Important
A nation's NIIP is a key part of the national balance sheet since NIIP plus the value of non-financial assets is equivalent to an economy's net worth. The NIIP, combined with the balance of payments transactions, mirrors the domestic economy's set of international accounts.
The NIIP position is an important barometer of a nation's financial condition and creditworthiness. A negative NIIP figure shows that foreign nations own a greater amount of the domestic nation's assets than the domestic nation does of foreign assets, subsequently making it a debtor nation. On the other hand, a positive NIIP figure demonstrates that the domestic nation's ownership of foreign assets is greater than the foreign nation's ownership of that domestic nation's assets, in this way making it a creditor nation.
Two metrics used to survey the NIIP's size comparative with the economy's size are the ratio of NIIP to gross domestic product (GDP) and the ratio of NIIP to the economy's total financial assets.
Illustration of a Net International Investment Position (NIIP)
U.S. NIIP data is distributed by the Bureau of Economic Analysis (BEA) and available to all.
The country's NIIP toward the finish of the second from last quarter of 2020 was - $13.95 trillion, a diminishing from its prior perusing of - $13.08 trillion toward the finish of the second quarter of 2020. This means that the difference in the value of foreign assets owned by the U.S. fell further below the value of U.S. assets owned by foreign nations.
This is the way the numbers piled up:
- Foreign assets owned by the U.S. at end-Q3 2020 = $29.41 trillion
- U.S. assets owned by foreign nations at end-Q3 2020 = $43.36 trillion
- NIIP = - $13.95 trillion
Features
- It very well may be seen as a nation's balance sheet with the remainder of the world at a specific point in time.
- A nation with a positive NIIP is a creditor nation, while a nation with a negative NIIP is a debtor nation.
- A net international investment position (NIIP) measures the gap between a nation's stock of foreign assets and a foreigner's stock of that nation's assets.
- NIIP is an important barometer of a nation's financial condition and creditworthiness.
