DP9109 Credit Constraints and Growth in a Global Economy
Author(s): | Nicolas Coeurdacier, Stéphane Guibaud, Keyu Jin |
Publication Date: | August 2012 |
Keyword(s): | capital flows, credit constraints, Globalization, life-cycle household savings, saving and current account imbalances |
JEL(s): | F21, F32, F41 |
Programme Areas: | International Macroeconomics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=9109 |
In a period of rapid integration and accelerated growth in emerging markets, three striking trends have been (1) a divergence in the private saving rates of emerging markets and advanced economies, (2) large net capital outflows from emerging markets, and (3) a sustained decline in the world interest rate. This paper shows that in a multi-period OLG model, the interaction between growth and household credit constraints --- more severe in emerging markets --- is able to account for all of the above facts. We provide micro-level evidence that corroborates our mechanism: saving behaviors across age groups in the U.S. and China are broadly supportive of the predictions of the model.