Corporate Saving in Global Rebalancing

Philippe Bacchetta

University of Lausanne; Swiss Finance Institute; Centre for Economic Policy Research (CEPR)

Kenza Benhima

University of Lausanne

May 1, 2014

Swiss Finance Institute Research Paper No. 14-35

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.

Number of Pages in PDF File: 27

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Date posted: June 18, 2014  

Suggested Citation

Bacchetta, Philippe and Benhima, Kenza, Corporate Saving in Global Rebalancing (May 1, 2014). Swiss Finance Institute Research Paper No. 14-35. Available at SSRN: http://ssrn.com/abstract=2440618 or http://dx.doi.org/10.2139/ssrn.2440618

Contact Information

Philippe Bacchetta (Contact Author)
University of Lausanne ( email )
Faculty of Business and Economics
Internef 523
1015 Lausanne
HOME PAGE: http://www.hec.unil.ch/pbacchetta/
Swiss Finance Institute ( email )
c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900

Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Kenza Benhima
University of Lausanne ( email )
Lausanne, CH-1015
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