27 Pages Posted: 18 Jun 2014
Date Written: May 1, 2014
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: 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