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Bubbles, External Imbalances & Demand for International Liquidity in the Bretton Woods II System

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Author Info

  • Andrea Ricci

    ()
    (Dipartimento di Economia e Metodi Quantitativi, Università di Urbino (Italy))

Abstract

Global structural factors both monetary and real played a prominent role in the burst of subprime crisis: 1) the Bretton Woods II international monetary system; 2) the reduction of US real investment return compared with competing countries. We develop a theoretical model to analyze the impact of these factors and macroeconomic policies on US current account and asset prices. The excess saving of U.S. nonfinancial corporations from 2000-2001 has undermined the stability of the Bretton Woods II system. Accommodative US monetary and fiscal policies have mitigated the imbalances but in the long term structural factors have prevailed. Only a recovery of US real capital profitability can ensure long run coexistence between present model of global development and current international monetary system.

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File URL: http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_09_06.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini in its series Working Papers with number 0906.

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Length: 12 pages
Date of creation: 2009
Date of revision: 2009
Handle: RePEc:urb:wpaper:09_06

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Web page: http://www.econ.uniurb.it/
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Keywords: Current Account; Bretton Woods II; External imbalances; Saving Investment; International Liquidity; Asset Prices.;

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