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Corporate Saving in Global Rebalancing

27 Pages Posted: 18 Jun 2014  

Philippe Bacchetta

University of Lausanne; Ecole Polytechnique Fédérale de Lausanne - Ecole Polytechnique Fédérale de Lausanne; Centre for Economic Policy Research (CEPR)

Kenza Benhima

University of Lausanne

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2014

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.

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: https://ssrn.com/abstract=2440618 or http://dx.doi.org/10.2139/ssrn.2440618

Philippe Bacchetta (Contact Author)

University of Lausanne ( email )

Faculty of Business and Economics
Internef 523
1015 Lausanne
Switzerland

HOME PAGE: http://www.hec.unil.ch/pbacchetta/

Ecole Polytechnique Fédérale de Lausanne - Ecole Polytechnique Fédérale de Lausanne ( email )

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Kenza Benhima

University of Lausanne ( email )

Lausanne, Vaud CH-1015
Switzerland

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