Corporate saving in global rebalancing

Philippe Bacchetta; Kenza Benhima

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.

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Year of publication:	2014
Authors:	Bacchetta, Philippe ; Benhima, Kenza
Publisher:	Lausanne : Univ. de Lausanne, DEEP
Subject:	Capital Flows \| Credit Constraints \| Global Imbalances \| Financial Crisis \| Kapitalmobilität \| Capital mobility \| Unternehmen \| Enterprise \| Sparen \| Savings \| Außenwirtschaftliches Gleichgewicht \| External balance \| Kreditrationierung \| Credit rationing \| Finanzkrise \| Financial crisis \| Konjunkturzusammenhang \| Business cycle synchronization \| Zwei-Länder-Modell \| Two-country model \| Theorie \| Theory \| Schwellenländer \| Emerging economies \| Industrieländer \| Industrialized countries