The paradox of global thrift

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• dc.contributor.author Fornaro, Luca
• dc.contributor.author Romei, Federica
• dc.date.accessioned 2020-06-16T10:36:26Z
• dc.date.available 2020-06-16T10:36:26Z
• dc.date.issued 2019
• dc.description.abstract This paper describes a paradox of global thrift. Consider a world in which interest rates are low and monetary policy is constrained by the zero lower bound. Now imagine that governments implement prudential financial and fiscal policies to stabilize the economy. We show that these policies, while effective from the perspective of individual countries, might backfire if applied on a global scale. In fact, prudential policies generate a rise in the global supply of savings and a drop in global aggregate demand. Weaker global aggregate demand depresses output in countries at the zero lower bound. Due to this effect, noncooperative financial and fiscal policies might lead to a fall in global output and welfare.
• dc.description.sponsorship Luca Fornaro acknowledges financial support from the Spanish Ministry of Economy, Industry and Competitiveness, through the Severo Ochoa Programme for Centres of Excellence in R&D (SEV-2015-0563) and grant ECO2016-79823-P (AEI/FEDER, UE), the European Union’s Horizon 2020 Research and Innovation Programme under Grant Agreement no. 649396, the Cerca Programme (Generalitat de Catalunya) and the Barcelona GSE Seed Grant. Federica Romei acknowledges financial support from the Fellowship Visiting program 2017–2018 at the Banco de España.
• dc.format.mimetype application/pdf
• dc.identifier.citation Fornaro L, Romei F. The paradox of global thrift. Am Econ Rev. 2019 Nov;109(11):3745-79. DOI: 10.1257/aer.20180608
• dc.identifier.doi http://dx.doi.org/10.1257/aer.20180608
• dc.identifier.issn 0002-8282
• dc.identifier.uri http://hdl.handle.net/10230/44988
• dc.language.iso eng
• dc.publisher American Economic Association
• dc.relation.ispartof Am Econ Rev. 2019 Nov;109(11):3745-79. DOI: 10.1257/aer.20180608
• dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
• dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/ECO2016-79823-P
• dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/SEV-2015-0563
• dc.rights © American Economic Association. Can be found at https://www.aeaweb.org/articles?id=10.1257/aer.20180608
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.subject.other Crisis econòmiques
• dc.subject.other Crisis financeres
• dc.subject.other Política fiscal
• dc.subject.other Política econòmica
• dc.title The paradox of global thrift
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/publishedVersion