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.
Valuation effects have been increasingly important for the U.S. in the last two decades, given a dramatic, sharp rise in international cross-country portfolio holdings.
For the U.S., valuation effects are partly compensating its current account deficits and therefore mitigating the decline of its net foreign assets.
Economists at the Federal Reserve estimated that during 1994-2007, the U.S. valuation effects (in stocks and bonds) are about +$1.2 trillion, about 22% of the U.S. total current account deficits,.