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An Equilibrium Model of “Global Imbalances” and Low Interest Rates
Open accessAbstract
The sustained rise in US current account deficits, the stubborn decline in long-run real rates, and the rise in US assets in global portfolios appear as anomalies from the perspective of conventional models. This paper rationalizes these facts as an equilibrium outcome when different regions of the world differ in their capacity to generate financial assets from real investments. Extensions of the basic model generate exchange rate and foreign direct investment excess returns broadly consistent with the recent trends in these variables. The framework is flexible enough to shed light on a range of scenarios in a global equilibrium environment. (JEL: E44, F21, F31, F32)
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Citations
Cited by
Song, Z., Storesletten, K., & Zilibotti, F. (2011) · American Economic Review · doi:10.1257/aer.101.1.196 · Cited by 1,741
The Missing Wealth of Nations: Are Europe and the U.S. net Debtors or net Creditors?*
Zucman, G. (2013) · The Quarterly Journal of Economics · doi:10.1093/qje/qjt012 · Cited by 544
Macrofinancial History and the New Business Cycle Facts
Jordà, Ò., Schularick, M., & Taylor, A. M. (2017) · NBER Macroeconomics Annual · doi:10.1086/690241 · Cited by 486
Financial crash, commodity prices, and global imbalances
Caballero, R. J., Farhi, E., & Gourinchas, P.-O. (2008) · Brookings Papers on Economic Activity · doi:10.1353/eca.0.0013 · Cited by 266
Self-citationGlobal imbalances and the financial crisis: reassessing the role of international finance
BORIO, C., & DISYATAT, P. (2010) · Asian Economic Policy Review · doi:10.1111/j.1748-3131.2010.01163.x · Cited by 66
Metadata
- Authors
- Caballero, R. J., Farhi, E., & Gourinchas, P.-O.
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2008-03-01
- Volume
- 98
- Issue
- 1
- Pages
- 358-393
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W3125124862
- Cited by
- 1,053
- References
- 0
- FWCI
- 133.56
- Type
- journal article
- Language
- en
- Open access
- green
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- Caballero, R. J., Farhi, E., & Gourinchas, P.-O. (2008). An Equilibrium Model of “Global Imbalances” and Low Interest Rates. American Economic Review. https://doi.org/10.1257/aer.98.1.358
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
