The Demand for Liquid Assets, Corporate Saving, and Global Imbalances

Philippe Bacchetta and Kenza Benhima

No 9268, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In the recent decade, capital outflows from emerging economies, in the form of a demand for liquid assets, have played a key role in the context of global imbalances. In this paper, we model the demand for liquid assets by firms in a dynamic open-economy macroeconomic model. We find that the implications of this model are very different from standard models, because the demand for foreign bonds is a complement to domestic investment rather than a substitute. We show that this complementarity is at work when an emerging economy is on its convergence path or when it has a higher TFP growth rate. This framework is consistent with global imbalances and with a number of stylized facts such as high corporate saving rates in high-growth, high-investment, emerging countries.

Keywords: Capital flows; Credit constraints; Global imbalances (search for similar items in EconPapers)
JEL-codes: E22 F21 F41 F43 (search for similar items in EconPapers)
Date: 2012-12
New Economics Papers: this item is included in nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: The Demand for Liquid Assets, Corporate Saving, and Global Imbalances (2010)
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