The role of corporate saving in global rebalancing

Philippe Bacchetta, Kenza Benhima 24 August 2014

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The increase in global imbalances in the last decade posed a theoretical challenge for international macroeconomics. Why did some less-developed countries with a higher need for capital, like China, lend to richer countries? The inconsistency of standard open-economy dynamic models with actual global capital flows had already been stressed before (e.g. by Lucas 1990), but the sensitivity to this issue became more acute with increasing global imbalances. This stimulated the development of several alternative theoretical frameworks.

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Topics:  International finance International trade

Tags:  interest rates, global imbalances, capital flows, saving, global crisis, credit constraints, savings glut, zero lower bound, corporate saving, global rebalancing

Why Asian firms hold cash

Charles Yuji Horioka, Akiko Terada-Hagiwara 25 January 2014

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In many, if not most, economies, sharp declines in household saving rates have been offset by sharp increases in corporate saving rates for the past two decades (see, for example, Karabarbounis and Neiman 2012). Even so, relatively little research has been done on the determinants of corporate saving.

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Topics:  Financial markets

Tags:  investment, Asia, saving, financial frictions, savings, corporate saving, borrowing constraints

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