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

Is Piketty’s ‘Second Law of Capitalism’ fundamental?

Per Krusell, Tony Smith 01 June 2014

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Over the last several weeks, we have thought quite a bit about the main message in Thomas Piketty’s now world-famous book, Capital in the Twenty-First Century (Piketty 2014). We have also discussed it at great length with colleagues. In sum, at least in our departments, there has been a massive collective effort at interpreting both the material presented in the book and the background material on which the book builds. In this column we would like to present one perspective on the book that does not seem to have attracted sufficient attention in the public discussions.

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Topics:  Poverty and income inequality

Tags:  growth, Inequality, wealth, saving, savings

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

Nudges to nudge up the savings rate

James Choi, Emily Haisley, Jennifer Kurkoski, Cade Massey 28 March 2012

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There is widespread concern that individuals do not save enough for retirement because they are financially illiterate (Lusardi and Mitchell 2007, Bucher-Koenen and Lusardi 2011) or suffer from self-control problems (Angeletos et al 2001). This concern has motivated policymakers and organisations to implement policies that promote higher savings. Traditionally, these policies have focused on using economic levers such as tax incentives and employer-based subsidies for saving.

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Topics:  Frontiers of economic research Labour markets

Tags:  saving, Behavioural economics, Retirement, nudging

Welfare payments, liquidity constraints, and crime

Fritz Foley 05 August 2008

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Consider an individual who receives support from welfare payments that occur once a month. Several recent papers indicate that this individual is likely to spend this income soon after receiving it and to face severe liquidity constraints. Dobkin and Puller (2007), Shapiro (2005), and Stephens (2003) find that recipients of government income support increase their consumption when these payments arrive and experience increasing marginal utility of consumption in between payments.

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Topics:  Welfare state and social Europe

Tags:  US, crime, Poverty, welfare, liquidity constraints, consumption smoothing, saving

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