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Households saving and financial spillovers in the Euro area

Author

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  • Cristina Badarau

    (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux)

  • F. Huart
  • I. Sangaré

Abstract

The aim of this paper is to study the consequences of a preference shock resulting in an increase in household savings in one country of a monetary union such as the Euro area. We study the macroeconomic effects of such a shock by developing a dynamic stochastic general equilibrium model which describes a two-country monetary union open to the rest of the world. A key feature of the model deals with one specific dimension of financial integration, namely cross-border bank holdings of government bonds. We show that a negative preference shock in one country can have salient spillover effects on the rest of the union. Spillovers come not only from the financial markets opening-up, but also from the intensity of intra-union trade, and the response of macroeconomic (monetary and fiscal) policies. © 2021 Board of Trustees of the Bulletin of Economic Research and John Wiley & Sons Ltd

Suggested Citation

  • Cristina Badarau & F. Huart & I. Sangaré, 2021. "Households saving and financial spillovers in the Euro area," Post-Print hal-03407534, HAL.
    • Handle: RePEc:hal:journl:hal-03407534
    DOI: 10.1111/boer.12275
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