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Editor's Choice The Making of America’s Imbalances

Author

Listed:
  • Moritz Schularick
  • Paul Wachtel

Abstract

This article tracks the history of sectoral saving and borrowing in the US economy over the past 50 years. We show that the financial imbalances that erupted in the financial crisis of 2008 were long in the making and preceded the emergence of global imbalances in the 2000s. These new dynamics in the household sector were already apparent in the 1990s, long before the deterioration in the US government balance or the current account balance and long before the arrival on the international stage of Chinese reserve accumulation. The record low household savings rate in the past decade was the product of two separate trends: a sharp fall in the asset acquisition of American households in the 1990s, and an explosion of mortgage borrowing in the 2000s. The American credit boom of the 2000s had few direct links to reserve accumulation in emerging markets. The mortgage boom was financed by the US financial sector, which intermediated foreign funds from ‘private’ sources. (JEL codes: E21, E22, F32, N10, N12)

Suggested Citation

  • Moritz Schularick & Paul Wachtel, 2014. "Editor's Choice The Making of America’s Imbalances," CESifo Economic Studies, CESifo Group, vol. 60(1), pages 62-88.
    • Handle: RePEc:oup:cesifo:v:60:y:2014:i:1:p:62-88.
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifu013
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    Cited by:

    1. Liu, Shengli & Liang, Yongtu, 2021. "Statistics of catastrophic hazardous liquid pipeline accidents," Reliability Engineering and System Safety, Elsevier, vol. 208(C).
    2. Giorgio Nuzzo & Stefano Piermattei, 2020. "Discussing Measures of Financial Inclusion for the Main Euro Area Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 148(3), pages 765-786, April.
    3. Massimo Coletta & Riccardo De Bonis & Stefano Piermattei, 2019. "Household Debt in OECD Countries: The Role of Supply-Side and Demand-Side Factors," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 143(3), pages 1185-1217, June.

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

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