Excess Savings and Twin Deficits: The Transmission of Fiscal Stimulus in Open Economies
Rishabh Aggarwal,
Adrien Auclert,
Matthew Rognlie and
Ludwig Straub
No 17397, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
We study the effects of debt-financed fiscal transfers in a general equilibrium, heterogeneous-agent model of the world economy. In the long run, increases in government debt anywhere raise the world interest rate and increase private wealth everywhere. In the short run, a country with a larger-than-average fiscal deficit experiences both a large increase in private savings (“excess savings†) and a small but persistent current account deficit (a slow-motion “twin deficit†). These patterns are consistent with the evolution of the world’s balance of payments since the beginning of the Covid pandemic.
Keywords: Distribution (search for similar items in EconPapers)
JEL-codes: E62 F32 F41 (search for similar items in EconPapers)
Date: 2022-06
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Related works:
Journal Article: Excess Savings and Twin Deficits: The Transmission of Fiscal Stimulus in Open Economies (2023) 
Chapter: Excess Savings and Twin Deficits: The Transmission of Fiscal Stimulus in Open Economies (2022) 
Working Paper: Excess Savings and Twin Deficits: The Transmission of Fiscal Stimulus in Open Economies (2022) 
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