Capital Flows, Consumption Booms and Asset Bubbles: A Behavioural Alternative to the Savings Glut Hypothesis
AbstractBernanke (2005) hypothesized that a â€œglobal savings glutâ€ was causing large trade imbalances. However, we show that the global savings rates did not show a robust upward trend during the relevant period. Moreover, if there had been a global savings glut there should have been a large investment boom in the countries that imported capital. Instead, those countries experienced consumption booms. National asset bubbles explain the international imbalances. The bubbles raised consumption, resulting in large trade deficits. In a sample of 18 OECD countries plus China, movements in home prices alone explain half of the variation in trade deficits.
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Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 4686766.
Date of creation: 2010
Date of revision:
Publication status: Published in Economic Journal -London-
Other versions of this item:
- David Laibson & Johanna Mollerstrom, 2010. "Capital Flows, Consumption Booms and Asset Bubbles: A Behavioural Alternative to the Savings Glut Hypothesis," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 120(544), pages 354-374, 05.
- David Laibson & Johanna Mollerstrom, 2010. "Capital Flows, Consumption Booms and Asset Bubbles: A Behavioural Alternative to the Savings Glut Hypothesis," NBER Working Papers, National Bureau of Economic Research, Inc 15759, National Bureau of Economic Research, Inc.
- E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
- F01 - International Economics - - General - - - Global Outlook
- G01 - Financial Economics - - General - - - Financial Crises
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