The New Global Balance

14 Pages Posted: 25 May 2009

See all articles by Christian M. Broda

Christian M. Broda

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Piero Ghezzi

Deutsche Bank

Eduardo Levy Levy-Yeyati

Universidad Torcuato Di Tella - School of Business

Date Written: March 23, 2009

Abstract

We present a unified framework in order to help understand how the current crisis would reshape the global financial balance. We believe that as risk appetite slowly returns, the negative risk premium that benefited US Treasuries and the dollar will rapidly reverse. As the Fed is likely to err on the side of growth for a long time, the dollar could test its 2008 lows within the next 12 months. Despite an expected fall in global imbalances, we believe a more stringent financial landscape and scarcer global savings justify a weak dollar in the medium term.

Keywords: global imbalances, financial crises, exchange rates

JEL Classification: E44, F02, G15

Suggested Citation

Broda, Christian M. and Ghezzi, Piero and Levy-Yeyati, Eduardo Levy, The New Global Balance (March 23, 2009). Available at SSRN: https://ssrn.com/abstract=1409455 or http://dx.doi.org/10.2139/ssrn.1409455

Christian M. Broda

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Piero Ghezzi

Deutsche Bank ( email )

31 West 52nd Street, 12th Floor
New York, NY 10019

Eduardo Levy Levy-Yeyati (Contact Author)

Universidad Torcuato Di Tella - School of Business ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina

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