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

Andrea Ricci

No 906, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

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.

Keywords: Current Account; Bretton Woods II; External imbalances; Saving Investment; International Liquidity; Asset Prices. (search for similar items in EconPapers)
JEL-codes: E41 E42 F32 F41 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2009, Revised 2009
New Economics Papers: this item is included in nep-cba, nep-mon and nep-opm
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