Fornaro, LucaUniversitat Pompeu Fabra. Departament d'Economia i Empresa2020-05-252020-05-252012-11-01International Debt Deleveraging, Journal of the European Economic Association, 16 (5), 2018, 1394-1432http://hdl.handle.net/10230/21305This 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.application/pdfengL'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative CommonsInternational debt deleveraging<resourceType xmlns="http://datacite.org/schema/kernel-3" resourceTypeGeneral="Other">info:eu-repo/semantics/workingPaper</resourceType><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">global debt deleveraging</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">sudden stops</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">liquidity trap</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">monetary union</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">precautionary savings</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">debt deflation.</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">Macroeconomics and International Economics</subject><rights xmlns="http://datacite.org/schema/kernel-3">info:eu-repo/semantics/openAccess</rights>