The paradox of global thrift
Mostra el registre complet Registre parcial de l'ítem
- dc.contributor.author Fornaro, Lucaca
- dc.contributor.author Romei, Federicaca
- dc.date.accessioned 2018-09-18T14:32:10Z
- dc.date.available 2018-09-18T14:32:10Z
- dc.date.issued 2018-04
- dc.description.abstract This paper describes a paradox of global thrift. Consider a world in which interest rates are low and monetary policy cannot stabilize the economy because it is frequently constrained by the zero lower bound. Now imagine that governments complement monetary policy with prudential financial and fiscal policies, because they perceive that limiting private and public borrowing during booms will help stabilize the economy by reducing the risk of financial crises and by creating space for fiscal interventions during busts. We show that these policies, while effective from the perspective of individual countries, might backfire if applied on a global scale. In a financially integrated world, in fact, prudential policies generate a rise in the global supply of savings, or equivalently a drop in global aggregate demand. In turn, weaker global aggregate demand depresses output in countries whose monetary policy is constrained by the zero lower bound. Due to this effect, the world might paradoxically experience a fall in output and welfare following the implementation of well-intended prudential policies.ca
- dc.description.sponsorship The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
- dc.format.mimetype application/pdfca
- dc.identifier.uri http://hdl.handle.net/10230/35458
- dc.language.iso engca
- dc.relation.ispartofseries ADEMU Working Paper Series;99
- dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
- dc.rights This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed.ca
- dc.rights.accessRights info:eu-repo/semantics/openAccessca
- dc.rights.uri https://creativecommons.org/licenses/by/4.0/ca
- dc.subject.other Liquidity trapsca
- dc.subject.other Zero lower boundca
- dc.subject.other Capital flowsca
- dc.subject.other Fiscal policiesca
- dc.subject.other Macroprudential policiesca
- dc.subject.other Current account policiesca
- dc.subject.other Aggregate demand externalitiesca
- dc.subject.other International cooperationca
- dc.title The paradox of global thriftca
- dc.type info:eu-repo/semantics/workingPaperca