This file is part of IDEAS , which uses RePEc data
[ Papers |
Articles |
Software |
Books |
Chapters |
Authors |
Institutions |
JEL Classification |
NEP reports |
Search |
New papers by email |
Author registration |
Rankings |
Volunteers |
FAQ |
Blog |
Help! ]
Capital Flows, Interest Rates and Precautionary Behaviour: a model of Global Imbalances Author info | Abstract | Publisher info | Download info | Related research | Statistics Marcus Miller (Warwick University)
Lei Zhang (Warwick University)
Additional information is available for the following
registered author(s):
A dynamic stochastic model of global equilibrium, where countries outside the US face higher risk than the US itself, predicts current account surpluses in the RoW and US deficits. With Loss Aversion, such precautionary savings can cause substantial ‘global imbalances’, particularly if there is an inefficient supply of global ‘insurance’. In principle, lower real interest rates will ensure aggregate demand equals supply at a global level (though the required real interest may be negative). Low interest rates and high savings outside the US appear to be an efficient global equilibrium: but is this sustainable? A precautionary savings glut appears to us to be a temporary phenomenon, destined for correction as and when adequate reserve levels are achieved. But if the process of correction is triggered by ‘Sudden Stop’ on capital flows to the US, might it not lead to the inefficient outcomes forecast by several leading macroeconomists? When precautionary saving is combined with financial panic, history offers no guarantee of full employment.
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page . Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Paper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2006 with number
152.
Download reference. The following formats are available: HTML
(with abstract ),
plain text
(with abstract ),
BibTeX ,
RIS (EndNote, RefMan, ProCite),
ReDIF
Length:
Date of creation: 02 Feb 2007Date of revision:
Handle: RePEc:mmf:mmfc06:152Contact details of provider: Web page: http://www.essex.ac.uk/afm/mmf/index.html
For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Keywords: stochastic dynamic general equilibrium ; loss aversion ; liquidity trap ; Other versions of this item:
Find related papers by JEL classification: D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
This paper has been announced in the following NEP Reports :
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004.
"The revived Bretton Woods system ,"
International Journal of Finance & Economics ,
John Wiley & Sons, Ltd., vol. 9(4), pages 307-313.
[Downloadable!]
Morten O. Ravn & Stephanie Schmitt-Grohe, 2004.
"Deep Habits ,"
2004 Meeting Papers
208, Society for Economic Dynamics.
[Downloadable!]
Other versions:
Ravn, Morten O. & Schmitt-Grohé, Stephanie & Uribe, Martín, 2004.
"Deep Habits ,"
CEPR Discussion Papers
4269, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Morten Ravn & Stephanie Schmitt-Grohe & Martin Uribe, 2004.
"Deep Habits ,"
NBER Working Papers
10261, National Bureau of Economic Research, Inc.
Morten Ravn & Stephanie Schmitt-Grohe & Martin Uribe, 2006.
"Deep Habits ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 73(1), pages 195-218, 01.
[Downloadable!] (restricted) Caballero, Ricardo & Farhi, Emmanuel & Gourinchas, Pierre-Olivier, 2006.
"An Equilibrium Model of 'Global Imbalances' and Low Interest Rates ,"
CEPR Discussion Papers
5573, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Other versions:
Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006.
"An Equilibrium Model of Global Imbalances and Low Interest Rates ,"
2006 Meeting Papers
894, Society for Economic Dynamics.
[Downloadable!] Ricardo Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006.
"An Equilibrium Model of "Global Imbalances" and Low Interest Rates ,"
Center for International and Development Economics Research, Working Paper Series
1067, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
[Downloadable!] Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006.
"An Equilibrium Model of "Global Imbalances" and Low Interest Rates ,"
NBER Working Papers
11996, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Ricardo J Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2006.
"An equilibrum model of "global imbalances" and low interest rates ,"
BIS Working Papers
222, Bank for International Settlements.
[Downloadable!] Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2008.
"An Equilibrium Model of "Global Imbalances" and Low Interest Rates ,"
American Economic Review ,
American Economic Association, vol. 98(1), pages 358-93, March.
[Downloadable!] Christopher D. Carroll & Jody Overland & David N. Weil, 2000.
"Saving and Growth with Habit Formation ,"
American Economic Review ,
American Economic Association, vol. 90(3), pages 341-355, June.
[Downloadable!] (restricted)
Other versions: David Backus & Bryan Routledge & Stanley Zin, 2004.
"Exotic Preferences for Macroeconomists ,"
Working Papers
04-20, New York University, Leonard N. Stern School of Business, Department of Economics.
[Downloadable!]
Other versions:
David Backus & Bryan Routledge & Stanley Zin, 2004.
"Exotic Preferences for Macroeconomists ,"
NBER Working Papers
10597, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) David K. Backus & Bryan R. Routledge & Stanley E. Zin, 2005.
"Exotic Preferences for Macroeconomists ,"
NBER Chapters ,
in: NBER Macroeconomics Annual 2004, Volume 19, pages 319-414
National Bureau of Economic Research, Inc.
[Downloadable!] Marcus Miller & Olli Castrén & Lei Zhang, 2007.
"'Irrational exuberance' and capital flows for the US New Economy: a simple global model ,"
International Journal of Finance & Economics ,
John Wiley & Sons, Ltd., vol. 12(1), pages 89-105.
[Downloadable!]
David Backus & Espen Henricksen & Frederic Lambert & Chris Telmer, 2005.
"Current Account Fact and Fiction ,"
2005 Meeting Papers
115, Society for Economic Dynamics.
Stephany Griffith-Jones & Krishnan Sharma, 2006.
"GDP-Indexed Bonds: Making It Happen ,"
Working Papers
21, United Nations, Department of Economics and Social Affairs.
[Downloadable!]
Chari, V V & Kehoe, Patrick J & McGrattan, Ellen R, 2002.
"Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates? ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 69(3), pages 533-63, July.
Other versions:
V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000.
"Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates? ,"
NBER Working Papers
7869, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1998.
"Can sticky price models generate volatile and persistent real exchange rates? ,"
Staff Report
223, Federal Reserve Bank of Minneapolis.
[Downloadable!] V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002.
"Can sticky price models generate volatile and persistent real exchange rates? ,"
Staff Report
277, Federal Reserve Bank of Minneapolis.
[Downloadable!] Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2004.
"Financial Globalization and Exchange Rates ,"
CEPR Discussion Papers
4745, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Other versions:
Philip R. Lane & Gian Maria Milesi-Ferretti, 2005.
"Financial Globalisation and Exchange Rates ,"
The Institute for International Integration Studies Discussion Paper Series
iiisdp044, IIIS.
[Downloadable!] Philip R. Lane & G Milesi-Feretti, 2004.
"Financial Globalization and Exchange Rates ,"
CEP Discussion Papers
dp0662, Centre for Economic Performance, LSE.
[Downloadable!] Gian Maria Milesi-Ferretti & Philip R. Lane, 2005.
"Financial Globalization and Exchange Rates ,"
IMF Working Papers
05/3, International Monetary Fund.
[Downloadable!] Christopher M. Meissner & Alan M. Taylor, 2006.
"Losing our Marbles in the New Century? The Great Rebalancing in Historical Perspective ,"
NBER Working Papers
12580, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions: E. Kohlscheen & M. P. Taylor, 2008.
"International liquidity swaps: is the Chiang Mai Initiative pooling reserves efficiently? ,"
International Journal of Finance & Economics ,
John Wiley & Sons, Ltd., vol. 13(4), pages 323-332.
[Downloadable!]
Other versions: Gourinchas, Pierre-Olivier & Rey, Hélène, 2005.
"From World Banker to World Venture Capitalist: US External Adjustment and The Exorbitant Privilege ,"
CEPR Discussion Papers
5220, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Other versions: Driffill, John & Snell, Andrew, 2003.
" What Moves OECD Real Interest Rates? ,"
Journal of Money, Credit and Banking ,
Blackwell Publishing, vol. 35(3), pages 375-402, June.
Romain Ranciere & Olivier Jeanne, 2006.
"The Optimal Level of International Reserves for Emerging Market Countries: Formulas and Applications ,"
IMF Working Papers
06/229, International Monetary Fund.
[Downloadable!]
Marcus Miller & Olli Castrén & Lei Zhang, 2005.
"Capital flows and the US ‘New Economy’ - consumption smoothing and risk exposure ,"
Working Paper Series
459, European Central Bank.
[Downloadable!]
Full
references
Access and
download statistics Did you know? All bibliographic data on IDEAS has been put in the public domain by the publishers.
This page was last updated on 2009-11-13.
This information is provided to you by IDEAS at the Department of Economics , College of Liberal Arts and Sciences , University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics .