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

When microentrepreneurs reinvest: The role of formal and informal saving

Thorsten Beck, Haki Pamuk, Burak Uras 21 April 2014

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In developing countries, intermediation costs and enforcement frictions constrain access to external finance for micro and small enterprises, leaving entrepreneurs' earning retention as a key source of funds for small business growth. But what explains entrepreneurial decisions to reinvest in their own businesses? This column reports on recent research using an MSE survey for over 6,000 entrepreneurs undertaken in Tanzania in 2010.

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Topics:  Development

Tags:  credit constraints, microentrepreneurs, informal saving

Fiscal adjustment and growth: Beware of the credit constraints

Emanuele Baldacci, Sanjeev Gupta, Carlos Mulas-Granados 31 March 2014

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In the aftermath of the recent financial crisis, the discussion of the effects of fiscal adjustment on economic growth has intensified. While some scholars have focused on the characteristics of the fiscal consolidation needed to bring public debt down from historically high levels, others have examined the effects of alternative strategies on economic performance. The VoxEU debate aptly covered in “Has Austerity Gone Too Far?” (Corsetti 2012) sums up the conflicting positions.

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Topics:  Financial markets Macroeconomic policy

Tags:  financial crisis, fiscal policy, deleveraging, fiscal consolidation, debt, credit constraints, austerity

Consumption and credit constraints during financial crises

Petra Gerlach-Kristen, Rossana Merola, Conor O'Toole 01 December 2013

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Introduction

In most countries, households’ consumption expenditure accounts for more than half of GDP. How much households spend reflects their living standards, and typically households try to smooth consumption over time. As a result, consumption usually does not display large variability and, therefore, has found comparatively little academic and policy attention.

Since the onset of the financial crisis, consumption has dropped markedly in many countries. Figure 1 shows the development of per capita real consumption in the main European crisis countries.

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Topics:  Global crisis

Tags:  financial crises, consumption, credit constraints

How to get around credit constraints? The role of renting and leasing during financial crises

Peter N. Gal, Gabor Pinter 21 September 2013

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How does the ownership of capital affect the aggregate behaviour of the economy? Does it matter whether firms own or rent production capital such as machinery, equipment, offices, and structures? This question has been somewhat neglected by macroeconomists, mainly because in a frictionless world the question of capital ownership is irrelevant – firms are indifferent between renting and owning (Jorgenson 1963).

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Topics:  Financial markets

Tags:  financial crises, investment, business cycles, credit constraints, rental markets

Who gets the credit? And does it matter? Household vs. firm lending across countries

Thorsten Beck, Berrak Buyukkarabacak, Felix Rioja, Neven Valev 09 July 2009

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An extensive literature has documented the positive effect of financial development on economic growth and poverty reduction (Rajan and Zingales 1998; Beck, Levine and Loayza, 2000; Beck, Demirguc-Kunt and Levine, 2007).

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Topics:  Development Financial markets

Tags:  financial development, household credit, enterprise credit, lending, credit constraints

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