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Credit constraints and growth in a global economy

Listed author(s):
  • Keyu Jin
  • Stéphane Guibaud
  • Nicolas Coeurdacier

We show that in an open-economy OLG model, the interaction between growth differentials and household credit constraints, more severe in fast-growing countries, can explain three prominent global trends: a divergence in private saving rates between advanced and emerging economies, large net capital outflows from the latter, and a sustained decline in the world interest rate. Micro-level evidence on the evolution of age-saving profiles in the U.S. and China corroborates our mechanism. Quantitatively, our model explains about 40 percent of the divergence in aggregate saving rates, and a significant portion of the variations in age-saving profiles across countries and over time.

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File URL: http://eprints.lse.ac.uk/35706/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 35706.

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Length: 29 pages
Date of creation: 23 Feb 2011
Handle: RePEc:ehl:lserod:35706
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