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Corporate Saving and Global Rebalancing

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  • Philippe Bacchetta
  • Kenza Benhima

Abstract

In this paper, we examine theoretically how corporate saving in emerging markets is contributing to global rebalancing. We consider a two-country dynamic general equilibrium model, with a developed country and an emerging country. Firms need to save in liquid assets to finance their production projects, especially in the emerging country. In this context, we examine the impact of a credit crunch in the developed country and of a growth slowdown in the two countries. These three shocks imply smaller global imbalances and a positive output comovement, but have a different impact on interest rates. Contrary to common wisdom, a slowdown in the emerging market implies a trade balance improvement in the developed country.

Suggested Citation

  • Philippe Bacchetta & Kenza Benhima, 2014. "Corporate Saving and Global Rebalancing," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 17(2), pages 04-25, August.
  • Handle: RePEc:chb:bcchec:v:17:y:2014:i:2:p:04-25
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    References listed on IDEAS

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    1. Philippe Bacchetta & Kenza Benhima & Yannick Kalantzis, 2013. "Capital Controls with International Reserve Accumulation: Can This Be Optimal?," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(3), pages 229-262, July.
    2. Bacchetta Philippe & Benhima Kenza, 2010. "The Demand for Liquid Assets, Corporate Saving, and Global Imbalances," Cahiers de Recherches Economiques du Département d'économie 10.12, Université de Lausanne, Faculté des HEC, Département d’économie.
    3. Bengt Holmström & Jean Tirole, 2001. "LAPM: A Liquidity‐Based Asset Pricing Model," Journal of Finance, American Finance Association, vol. 56(5), pages 1837-1867, October.
    4. Holmström, Bengt, 2013. "Inside and Outside Liquidity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262518536, December.
    5. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
    6. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    7. Philippe Bacchetta & Kenza Benhima, 2015. "The Demand For Liquid Assets, Corporate Saving, And International Capital Flows," Journal of the European Economic Association, European Economic Association, vol. 13(6), pages 1101-1135, December.
    8. Woodford, Michael, 1990. "Public Debt as Private Liquidity," American Economic Review, American Economic Association, vol. 80(2), pages 382-388, May.
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    Cited by:

    1. Saibene, Giacomo, 2019. "The corporate saving glut," Journal of Macroeconomics, Elsevier, vol. 62(C).
    2. Claudio Raddatz & Diego Saravia & Jaume Ventura, 2015. "Global Liquidity, Spillovers to Emerging Markets and Policy Responses: An Overview," Central Banking, Analysis, and Economic Policies Book Series, in: Claudio Raddatz & Diego Saravia & Jaume Ventura (ed.),Global Liquidity, Spillovers to Emerging Markets and Policy Responses, edition 1, volume 20, chapter 1, pages 001-011, Central Bank of Chile.

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    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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