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dc.contributor.authorCORNELI, Flavia
dc.date.accessioned2009-11-26T15:20:21Z
dc.date.available2009-11-26T15:20:21Z
dc.date.issued2009
dc.identifier.issn1725-6704
dc.identifier.urihttp://hdl.handle.net/1814/12893
dc.description.abstractAccording to the “Saving Glut hypothesis”, global imbalances are caused by inefficiently high level of precautionary savings in .nancially underdeveloped regions, where agents have limited opportunity to diversify idiosyncratic risk. This paper generalizes the approach by modeling idiosyncratic risk in entrepreneurial activities, which can be only partially hedged. As a result, agents save too much and invest too little, relative to the efficient allocation, depressing production activities and the real interest rate. Capital account liberalization towards financially more advanced economies then produces an outflow of capital in search of safer investment, with the effect of further reducing domestic investment in countries with poor financial institutions. The model predicts welfare losses for less financially developed economies, and an increase in wealth inequality for advanced economies. Finally, the present analysis is able to explain the direct link between the financial crisis and global recession and the long run implications of worsening financial conditions on countries’ net external positionsen
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.relation.ispartofseriesEUI ECOen
dc.relation.ispartofseries2009/41en
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectCurrent Accounten
dc.subjectFinancial Marketsen
dc.subjectHeterogeneityen
dc.subjectIncomplete Marketsen
dc.subjectInternational Capital Movementsen
dc.subjectE44en
dc.subjectD52en
dc.subjectF32en
dc.subjectG11en
dc.subjectG15en
dc.subjectO16en
dc.titleThe Saving Glut Explanation of Global Imbalances. The Role of Underinvestmenten
dc.typeWorking Paperen
dc.neeo.contributorCORNELI|Flavia|aut|
dc.neeo.contributorCORNELI|Flavia|aut|
dc.neeo.contributorCORNELI|Flavia|aut|
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