Credit Constraints and Growth in a Global Economy
AbstractIn a period of rapid integration and accelerated growth in emerging markets, three striking trends have been (1) a large and persistent increase in the private savings rate in emerging markets and fall in advanced economies, (2) large net capital outflows away from emerging markets, and (3) a sustained decline in the world interest. We add an additional important fact: private savings is the main driver of the cross-sectional variation in the current account in the past data. Standard models do poorly in accounting for these facts. We show that incorporating asymmetric household credit constraints in a global general-equilibrium model can deliver qualitatively consistent and quantitatively significant results. An important implication of our model is that countries with identical preferences may see opposite responses of the savings rate to changes in the common world interest rate.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 1040.
Date of creation: 2011
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- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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- Bacchetta Philippe & Benhima Kenza, 2010.
"The Demand for Liquid Assets, Corporate Saving, and Global Imbalances,"
Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP)
10.12, Université de Lausanne, Faculté des HEC, DEEP.
- Bacchetta, Philippe & Benhima, Kenza, 2012. "The Demand for Liquid Assets, Corporate Saving, and Global Imbalances," CEPR Discussion Papers 9268, C.E.P.R. Discussion Papers.
- Yi Wen, 2011. "Making sense of China’s astronomical foreign reserves," Working Papers 2011-018, Federal Reserve Bank of St. Louis.
- Bussière, Matthieu & Kalantzis, Yannick & Lafarguette, Romain & Sicular, Terry, 2013. "Understanding household savings in China: the role of the housing market and borrowing constraints," MPRA Paper 44611, University Library of Munich, Germany.
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