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

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  • 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.

Suggested Citation

  • Andrea Ricci, 2009. "Bubbles, External Imbalances & Demand for International Liquidity in the Bretton Woods II System," Working Papers 0906, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2009.
  • Handle: RePEc:urb:wpaper:09_06
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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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    Keywords

    Current Account; Bretton Woods II; External imbalances; Saving Investment; International Liquidity; Asset Prices.;

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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