extend the initial stocks forward<sup>and backwardover time. 12Therequired informationis drawn</sup> from a number of standard sources:<sup>initialstocks of domesticcapital are taken from the Penn</sup> World Tables, and combined with<sup>_flow_dataon grossdomestic investmentto build up capital</sup> stock series. For foreign holdings of<sup>domesticequity and domestic holdings of foreign equity, we</sup> rely primarily on data<sup>on stocksand flows of direct and portfolio equity investmentreportedin</sup> the IMF's Balance of Payments Statistics Yearbook.<sup>Finally, stocks of borrowing andlending</sup> are obtained **by** combining<sup>stock data on the debt of developingcountriesreportedin the World</sup> Bank's Global Development<sup>Financewith data ondebt stocksand flowsfrom the Balanceof</sup> Payments Statistics Yearbook.<sup>To account for mismeasurementof capitalflows (and hence</sup> stocks) and in order to capture<sup>unrecordedassets, we augment our measuresof loanassets</sup><sup>**by**</sup> adding to them the cumulative<sup>errors and omissionsof the Balanceof Payments.Putting together</sup> all these pieces, we arrive at estimates<sup>of the wealth stock of the countries in thesample.Using</sup> these estimated wealth stocks,<sup>weconstructtheforeignwealth</sup><sup>**/**domesticwealth ratios of each</sup> country _i._ This procedure yields data<sup>on wealthand itscomponents for a largegroupof industrial</sup> and developing countries.1<sup>3For the empiricalexperimentsin this paper, we restrict the sample to</sup> those economies possessing<sup>a numberof annualobservations in the periodfrom the1960s to the</sup> present sufficient to allow<sup>country-specifictime-series econometricestimation.We setsuch</sup> minimum at 20 (consecutive)<sup>years.Thisresults in anunbalanced panelof</sup><sup>_54_countrieswith time</sup> coverage ranging from<sup>20 to</sup><sup>**32**years.</sup>

**12** The main exceptions to<sup>this procedureare gold holdings,on which completestockdata areavailablefromthe</sup> IMF's International Financial<sup>Statistics, and somespecificitems of loanassetsand liabilities.These are foreign</sup> currency reserves of the central<sup>bank,available from IMF sources,andforeign debt of developingcountries,</sup> available from the World Bank's<sup>GlobalDevelopmentFinance.For theremaining wealth components,complete</sup> stock data are unavailable,<sup>andhencewe rely on the method of cumulatingflows evenfor those countrieswith more</sup> abundant stock data in order<sup>to avoid a potential bias that couldresult from applying different methodsto construct</sup> stocks in different countries:<sup>as longer time seriesof stock dataare available for afew rich countries, using these as</sup> the primary source would<sup>essentially result in different methodsbeing used to construct stocksfor rich and poor</sup> countries. These differences<sup>would then contaminate our inferences regarding, for example, how net foreign assets</sup> vary with wealth.

**13** We begin with a sample of<sup>**98**countries with populationgreater than one million andper capita</sup><sup>**GDP**greater than</sup> **1000 US** dollars at PPP<sup>in</sup><sup>**1990.Of**thesewe discard</sup><sup>**25**countrieswith missing,incomplete,or inconsistentbalance</sup> of payments data. Next,<sup>we alsodrop</sup><sup>**_5_**former socialist economies,whose datawe view asof uncertain reliability,</sup> and a handful **of** developing countries<sup>that haveexperienced prolongedwar episodes over the sampleyears.Finally,</sup> we also remove a few country-year<sup>observationscharacterized</sup><sup>**by**very small (or even negative)estimatesof wealth,</sup> corresponding to countries<sup>with verylarge external debt. We exclude these observationsof doubtful quality</sup><sup>**by**</sup> limiting the sample to<sup>those wherethe ratioof wealth to</sup><sup>**GDP**isgreater than</sup><sup>**_0.5._**</sup>

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