The effects of the saving and banking glut on the U.S. economy

Alejandro Justiniano*, Giorgio E. Primiceri, Andrea Tambalotti

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

22 Scopus citations

Abstract

We use a quantitative equilibrium model with houses, collateralized debt and foreign borrowing to study the impact of global imbalances on the U.S. economy in the 2000s. Our results suggest that the dynamics of foreign capital flows account for between one fourth and one third of the increase in U.S. house prices and household debt that preceded the financial crisis. The key to these findings is that the model generates the sustained low level of interest rates observed over that period.

Original languageEnglish (US)
Pages (from-to)S52-S67
JournalJournal of International Economics
Volume92
Issue numberSUPPL1
DOIs
StatePublished - 2014

Keywords

  • Banking glut
  • Collateral constraints
  • Current account deficit
  • Saving glut

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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