In economics, valuation effects of a country are the changes in the value of assets held abroad, minus the changes in the value of domestic assets held by foreign investors.
The traditional balance of payment identity ignores valuation effects, only recognizes that changes in the net foreign assets (NFA) are fully captured by the current account. The new balance of payment identity, however, considers the role of asset price changes and valuation effects. Changes in the NFA equal the current account plus valuation effects.
Read more about Valuation Effects: Valuation Effects and The U.S. Current Account Deficits
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