Corporate Saving in Global Rebalancing

Philippe Bacchetta and Kenza Benhima

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: In this paper, we examine theoretically how corporate saving in emerging markets is contributing to global rebalancing. We consider a two-country dynamic general equilibrium model, based on Bacchetta and Benhima (2014), with a Developed and an Emerging country. Firms need to save in liquid assets to finance their production projects, especially in the Emerging country. In this context, we examine the impact of a credit crunch in the Developed country and of a growth slowdown in both countries. These three shocks imply smaller global imbalances and a positive output comovement, but have a different impact on interest rates. Contrary to common wisdom, a slowdown in the Emerging market implies a trade balance improvement in the Developed country.

Keywords: Capital Flows; Credit Constraints; Global Imbalances; Financial Crisis (search for similar items in EconPapers)
JEL-codes: E22 F21 F41 F44 (search for similar items in EconPapers)
Pages: 27 pp.
Date: 2014-05
New Economics Papers: this item is included in nep-dge, nep-mac and nep-opm
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Published in Raddatz C., D. Saravia and J. Ventura (eds), Global Liquidity, Spillovers to Emerging Markets and Policy Responses, Santiago, Chile: Central Bank of Chile, 2015

Downloads: (external link)
http://www.hec.unil.ch/deep/textes/14.03.pdf (application/pdf)

Related works:
Chapter: Corporate Saving in Global Rebalancing (2015)
Journal Article: Corporate Saving and Global Rebalancing (2014)
Working Paper: Corporate Saving in Global Rebalancing (2014)
Working Paper: Corporate Saving in Global Rebalancing (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:14.03

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