Global Imbalances and Policy Wars at the Zero Lower Bound
<jats:title>Abstract</jats:title> <jats:p>This article explores the consequences of extremely low real interest rates in a world with integrated but heterogeneous capital markets, nominal rigidities, and an effective lower bound [a zero lower bound (ZLB) for simplic...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | English |
| Published: |
Oxford University Press (OUP)
2022
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| Online Access: | https://hdl.handle.net/1721.1/144450 |
| _version_ | 1826211681537097728 |
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| author | Caballero, Ricardo J Farhi, Emmanuel Gourinchas, Pierre-Olivier |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Caballero, Ricardo J Farhi, Emmanuel Gourinchas, Pierre-Olivier |
| author_sort | Caballero, Ricardo J |
| collection | MIT |
| description | <jats:title>Abstract</jats:title>
<jats:p>This article explores the consequences of extremely low real interest rates in a world with integrated but heterogeneous capital markets, nominal rigidities, and an effective lower bound [a zero lower bound (ZLB) for simplicity]. We establish four main results: (1) At the ZLB, creditor countries export their recession abroad, which we illustrate with a new Metzler diagram in quantities; (2) Beggar-thy-neighbour currency and trade wars provide stimulus to the undertaking country at the expense of other countries; (3) (Safe) public debt issuances and increases in government spending anywhere are expansionary everywhere; and (4) When there is a scarcity of safe assets, net issuers of these assets import the recession from abroad.</jats:p> |
| first_indexed | 2024-09-23T15:09:50Z |
| format | Article |
| id | mit-1721.1/144450 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T15:09:50Z |
| publishDate | 2022 |
| publisher | Oxford University Press (OUP) |
| record_format | dspace |
| spelling | mit-1721.1/1444502023-12-08T17:55:30Z Global Imbalances and Policy Wars at the Zero Lower Bound Caballero, Ricardo J Farhi, Emmanuel Gourinchas, Pierre-Olivier Massachusetts Institute of Technology. Department of Economics <jats:title>Abstract</jats:title> <jats:p>This article explores the consequences of extremely low real interest rates in a world with integrated but heterogeneous capital markets, nominal rigidities, and an effective lower bound [a zero lower bound (ZLB) for simplicity]. We establish four main results: (1) At the ZLB, creditor countries export their recession abroad, which we illustrate with a new Metzler diagram in quantities; (2) Beggar-thy-neighbour currency and trade wars provide stimulus to the undertaking country at the expense of other countries; (3) (Safe) public debt issuances and increases in government spending anywhere are expansionary everywhere; and (4) When there is a scarcity of safe assets, net issuers of these assets import the recession from abroad.</jats:p> 2022-08-26T12:01:59Z 2022-08-26T12:01:59Z 2021 2022-08-26T11:57:37Z Article http://purl.org/eprint/type/JournalArticle https://hdl.handle.net/1721.1/144450 Caballero, Ricardo J, Farhi, Emmanuel and Gourinchas, Pierre-Olivier. 2021. "Global Imbalances and Policy Wars at the Zero Lower Bound." Review of Economic Studies, 88 (6). en 10.1093/RESTUD/RDAB015 Review of Economic Studies Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Oxford University Press (OUP) NBER |
| spellingShingle | Caballero, Ricardo J Farhi, Emmanuel Gourinchas, Pierre-Olivier Global Imbalances and Policy Wars at the Zero Lower Bound |
| title | Global Imbalances and Policy Wars at the Zero Lower Bound |
| title_full | Global Imbalances and Policy Wars at the Zero Lower Bound |
| title_fullStr | Global Imbalances and Policy Wars at the Zero Lower Bound |
| title_full_unstemmed | Global Imbalances and Policy Wars at the Zero Lower Bound |
| title_short | Global Imbalances and Policy Wars at the Zero Lower Bound |
| title_sort | global imbalances and policy wars at the zero lower bound |
| url | https://hdl.handle.net/1721.1/144450 |
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