The Saving Glut Explanation of Global Imbalances. The Role of Underinvestment

DSpace/Manakin Repository

Show simple item record CORNELI, Flavia 2009-11-26T15:20:21Z 2009-11-26T15:20:21Z 2009
dc.identifier.issn 1725-6704
dc.description.abstract According 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 positions en
dc.format.mimetype application/pdf
dc.language.iso en en
dc.relation.ispartofseries EUI ECO en
dc.relation.ispartofseries 2009/41 en
dc.rights info:eu-repo/semantics/openAccess
dc.subject Current Account en
dc.subject Financial Markets en
dc.subject Heterogeneity en
dc.subject Incomplete Markets en
dc.subject International Capital Movements en
dc.subject E44 en
dc.subject D52 en
dc.subject F32 en
dc.subject G11 en
dc.subject G15 en
dc.subject O16 en
dc.title The Saving Glut Explanation of Global Imbalances. The Role of Underinvestment en
dc.type Working Paper en
dc.neeo.contributor CORNELI|Flavia|aut|
dc.neeo.contributor CORNELI|Flavia|aut|
dc.neeo.contributor CORNELI|Flavia|aut|
eui.subscribe.skip true

Files in this item

This item appears in the following Collection(s)

Show simple item record