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.