On the Macroeconomics of Asset Shortages

17 Pages Posted: 13 Dec 2006 Last revised: 8 May 2022

See all articles by Ricardo J. Caballero

Ricardo J. Caballero

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: December 2006

Abstract

The world has a shortage of financial assets. Asset supply is having a hard time keeping up with the global demand for store of value and collateral by households, corporations, governments, insurance companies, and financial intermediaries more broadly. The equilibrium response of asset prices and valuations to these shortages has played a central role in global economic developments over the last twenty years. The so-called "global imbalances," the recurrent emergence of speculative bubbles (which recently have transited from emerging markets, to the dot-coms, to real estate, to gold...), the historically low real interest rates and associated "interest-rate conundrum," and even the widespread low inflation environment and deflationary episodes in parts of the world, all fall into place once one adopts this asset shortage perspective.

Suggested Citation

Caballero, Ricardo J., On the Macroeconomics of Asset Shortages (December 2006). NBER Working Paper No. w12753, Available at SSRN: https://ssrn.com/abstract=949762

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