International debt deleveraging
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- dc.contributor.author Fornaro, Luca
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2020-05-25T09:27:08Z
- dc.date.available 2020-05-25T09:27:08Z
- dc.date.issued 2012-11-01
- dc.date.modified 2020-05-25T09:24:08Z
- dc.description.abstract This paper provides a framework to understand debt deleveraging in a group of financially integrated countries. During an episode of international deleveraging, world consumption demand is depressed and the world interest rate is low, reflecting a high propensity to save. If exchange rates are allowed to float, deleveraging countries can rely on depreciations to increase production and mitigate the fall in consumption associated with debt reduction. The key insight of the paper is that in a monetary union this channel of adjustment is shut off, because deleveraging countries cannot depreciate against the other countries in the monetary union, and therefore the fall in the demand for consumption and the downward pressure on the interest rate are ampliflied. As a result, deleveraging in a monetary union can generate a liquidity trap and an aggregate recession.
- dc.format.mimetype application/pdf*
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1401
- dc.identifier.citation International Debt Deleveraging, Journal of the European Economic Association, 16 (5), 2018, 1394-1432
- dc.identifier.uri http://hdl.handle.net/10230/21305
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1401
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword global debt deleveraging
- dc.subject.keyword sudden stops
- dc.subject.keyword liquidity trap
- dc.subject.keyword monetary union
- dc.subject.keyword precautionary savings
- dc.subject.keyword debt deflation.
- dc.subject.keyword Macroeconomics and International Economics
- dc.title International debt deleveraging
- dc.title.alternative
- dc.type info:eu-repo/semantics/workingPaper