I provide a new decomposition of the external constraint of a country in which, in addition to the trade and valuation channel, adjustments in the stochastic discount factor and the spread between average international returns and risk‐free rate can offset a current debt position. The importance of these channels is empirically assessed using US data. A primary contribution of the discount factor and secondary effects of excess and average returns are found in the non‐detrended analysis, confirming the theoretical characterization of the valuation effects in previous literature. By using detrended data instead, the role of excess returns would be spuriously overestimated.