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The Effects of the Saving and Banking Glut on the U.S. Economy

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  • Alejandro Justiniano
  • Giorgio Primiceri
  • Andrea Tambalotti

Abstract

We use a quantitative equilibrium model with houses, collateralized debt and foreign borrowing to study the impact of global imbalances on the U.S. economy in the 2000s. Our results suggest that the dynamics of foreign capital flows account for between one fourth and one third of the increase in U.S. house prices and household debt that preceded the financial crisis. The key to these findings is that the model generates the sustained low level of interest rates observed over that period.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19635.

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Date of creation: Nov 2013
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Publication status: published as The Effects of the Saving and Banking Glut on the U.S. Economy , Alejandro Justiniano, Giorgio E. Primiceri, Andrea Tambalotti. in NBER International Seminar on Macroeconomics 2013 , Clarida, Gopinath, and Reichlin. 2014
Handle: RePEc:nbr:nberwo:19635

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